Asian stocks mostly rise as markets digest Fed moves
Asian stocks mostly rose on Friday, as investors digested the US Federal Reserve’s latest message about raising short-term interest rates by the end of 2023.
Japan’s benchmark added 0.3% in morning trading to 29,108.23. South Korea’s Kospi rose 0.1% to 3,266.88. The Australian S & P / ASX 200 rose 0.5% to 7,395.00. The Hong Kong Hang Seng jumped 0.7% to 28,750.38, while the Shanghai Composite slipped nearly 0.1% to 3,523.05.
Investors are waiting for what the Bank of Japan might say about its monetary policy as the central bank ends a two-day policy meeting, although dramatic changes are not expected.
“We expect the BOJ to remain on hold, but continue to emphasize the accommodative bias,” Singapore’s Mizuho Bank’s Venkateswaran Lavanya said in a report, saying Japan’s “exit” from the Extreme monetary easing is expected to lag behind the Fed.
The Fed’s comments came on Wednesday, and global markets had already initially reacted on Thursday. But comments about the possibility of slowing down the central bank’s bond buying program are spilling over into the markets. Such support has been one of the main reasons for the stock market’s resurgence to record highs.
The S&P 500 slipped less than 0.1% to 4,221.86 after falling from a gain of 0.2% to a loss of 0.7%. Most stocks in the Index and Wall Street were down, but gains from Apple, Microsoft and a few other tech heavyweights helped offset the losses.
The Dow Jones Industrial Average fell 0.6% to 33,823.45, while the Nasdaq composite rose 0.9% to 14,161.35, driven by gains in technology and other stocks at high increase.
In the bond market, the yield on the 10-year Treasury bill returned almost all of its surge from the previous day. It fell to 1.51% against 1.57% Wednesday night.
The two-year yield, which tends to move more with Fed stock expectations, was more stable. It went from 0.21% to 0.22%.
The first step the Fed is likely to take would be a slowdown in its $ 120 billion monthly bond purchases, which help keep mortgages low, but the Fed chairman said such reduction was probably still “very long term”.
Any easing of Fed aid to the economy would be a big change for markets, which feasted on easy terms after the central bank cut short-term rates to zero and put other programs in place. emergency.
While the economy still needs support, the recovery is proving to be strong enough that it does not need the same emergency measures taken at the start of the pandemic, said Stephanie Link, chief investment strategist and portfolio manager at Hightower.
“We are going to get a reduction,” she said. “They need it, we don’t need emergency measures right now.”
The economy has started to explode out of its coma as more widespread vaccinations help the world get closer to normal. At the same time, rising commodity prices are forcing businesses across the economy to raise their own prices for customers, from fast food restaurants to used cars.
This is fueling concerns about whether higher inflation will be temporary, as the Fed predicts, or more durable. The reality could be more mixed. The rise in commodity prices is likely related to the increase in demand as the economy recovers, but the rise in wages is likely to be more sustainable as employers increase wages in order to attract workers, Link said.
Investors received somewhat disappointing economic news when the Labor Department said the number of Americans claiming unemployment benefits last week increased slightly. The total of 412,000 workers claiming unemployment benefits was worse than economists expected. If this turns out to be a trend rather than an aberration, it could push the Fed to hold the line longer on supporting the economy.
Stocks of companies whose earnings are most closely tied to a strong economy and interest rates have suffered some of the largest losses in the market.
S&P 500 energy stocks fell 3.5% after the price of crude oil fell.
Banks have struggled after falling long-term yields hurt their prospects for profit from loans. Bank of America fell 4.4% and JPMorgan Chase lost 2.9%.
Commodity producers were also weak, with miner Newmont falling 7% after the price of gold fell 4.7%. Gold tends to struggle when the Federal Reserve raises interest rates.
On the winning side were the large, tech-driven companies, which dominated the stock market for years as they continued to grow almost regardless of the strength of the economy. Amazon rose 2.2%, Microsoft 1.4%, and Apple 1.3%.
In energy trading, benchmark US crude fell 38 cents to $ 70.66 a barrel in electronic trading on the New York Mercantile Exchange. It fell from $ 1.11 to $ 71.04 a barrel on Thursday. Brent crude, the international standard, fell 43 cents to $ 72.65 a barrel.
In currency trading, the US dollar fell to 110.20 Japanese yen from 110.23 yen. The euro fell from $ 1.1908 to $ 1.1926.