HONG KONG: Reflation trades boosted Asian risky assets after Fed officials placated concerns of investors worried about inflation and tighter monetary policy.
Japanese markets outperformed after a shock first quarter economic shrinkage spurred hopes fresh stimulus measures will be unveiled.
Fed Vice-Chair Richard Clarida, who pointed to the weak April jobs report as proof of the slack in the economy, and Dallas Federal Reserve President Robert Kaplan reiterated his view that he does not expect interest rates to rise until next year.
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Japan’s Nikkei 225 index jumped 2.09%, Australia’s S&P ASX 200 added 0.60%, Hong Kong’s Hang Seng index climbed 1.42% but China’s CSI300 ended flat as signs emerged banks would further restrict credit into the world’s second largest economy. Regionally, the MSCI Asia Pacific index advanced 1.59%.
Japan’s Real GDP fell 1.3% q-o-q sa in 1Q21, weaker than expectations, after two quarters of firm gains with the state of emergency that was declared for most of 1Q21 weighing heavily on domestic demand.
“There will undoubtedly be fiscal money poured on this problem to soften the blow, though after so much already, it is difficult to see this having more than a fairly marginal effect,” said Robert Carnell, Regional Head of Research, Asia-Pacific at ING Bank.
CREDIT DATA
China’s markets underperformed after credit data suggested domestic Chinese banks did not disburse most of their Covid-19 assistance loans to the economy, as evidenced in the overall contraction in short-term lending over the first four months of 2021.
“This indicates that the central bank’s tapering will continue. Their next policy focus will likely be on the credit structure, ie, moderate credit expansion while retaining selective supportive measures to rebalance the economy,” said Zhaopeng Xing, strategist at ANZ.
The dollar tumbled down 0.34% to 89.86 versus a basket of currencies as the Fed’s comments convinced markets about a protracted bout of weakness.
Asia Stocks
- Japan’s Nikkei 225 index jumped 2.09%
- Australia’s S&P ASX 200 added 0.60%
- Hong Kong’s Hang Seng index climbed 1.42%
- China’s CSI300 ended flat
- The MSCI Asia Pacific index advanced 1.59%.
Stock of the day
China Mobile shares surged as much as 4.8% after it unveiled plans for a share issue to be priced “taking into account the interests of the existing Shareholders as a whole”.
Read more:
Japan’s first-quarter output falls more than expected
China’s factories hit a headwind of rising costs and weak demand
