Asian markets mostly up after Fed move
Asian stock markets mostly rose on Thursday as the US Federal Reserve announced fresh monetary easing and said it would not lift interest rates until unemployment was under control.
However, the gains were capped after the central bank’s chief Ben Bernanke said the looming fiscal cliff of huge tax hikes and deep spending cuts was already hitting the economy.
The yen continued its slide ahead of the weekend’s general election in Japan that is expected to see a victory for the opposition, whose leader has vowed to press for more aggressive measures to kickstart growth.
Tokyo climbed 1.15 per cent, lifted by the weakening yen, Hong Kong gained 0.22 per cent, Sydney added 0.10 per cent and Seoul was 0.60 per cent higher, but Shanghai lost 0.36 per cent.
After a two-day meeting the policy committee of the US central bank said it would replace its “Operation Twist” bond swapping programme with US$45 billion a month in straight bond buys, on an open-ended basis.
That comes on top of the US$40 billion a month purchasing announced in September.
The Fed also provided a surprise by saying it would not lift rates as long as the inflation outlook was below 2.5 per cent and the jobless rate, now at 7.7 per cent, stays above 6.5 per cent.
“The Fed’s decisions did not really surprise anyone, although its comments about expecting rates to remain very low as long as unemployment remains above 6.5 per cent were somewhat novel,” said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
“The bottom line is that it will continue its aggressive steps to foster economic growth,” he told Dow Jones Newswires.
However, the Fed’s announcement was followed by a warning by Bernanke that Washington needed to come to an agreement in their talks on avoiding the fiscal cliff, adding that the lack of action was already causing problems.
“Even though we have not even reached the point of the fiscal cliff potentially kicking in, it’s already affecting business investment and hiring decisions by creating uncertainty or creating pessimism,” he said at a news conference.
On Wall Street the Dow and S&P 500 ended flat, while the Nasdaq fell 0.28 per cent, with earlier gains from the Fed announcement cut back by Bernanke’s comments.
On currency markets the yen remained under pressure as Sunday’s poll approaches, with Prime Minister Yoshihiko Noda’s Democratic Party of Japan likely to lose to the Liberal Democratic Party, which is headed by Shinzo Abe.
Abe, a former prime minister, has promised to push a more aggressive monetary easing policy to jumpstart the economy.
The dollar was changing hands at 83.42 yen in early Asian trade, from 83.24 yen in New York late Wednesday, while the euro was at 108.95 yen from 108.85 yen. That compares with 82.67 yen and 107.48 yen earlier on Wednesday in Asia.
The euro bought US$1.3063 against US$1.3075.
Oil was lower in Asia Thursday, with New York’s main contract, light sweet crude for delivery in January, falling 19 cents to US$86.58 a barrel and Brent North Sea crude for January delivery shedding 15 cents to US$109.35.
Gold was at US$1,699.60 at mid morning in Asian trade, compared with US$1,713.22 late Wednesday.