Traders’ mood lifts as Fed’s reassurances finally sink in

Stocks across Asia’s markets edged ahead on Wednesday as investors were comforted by more calming messages from Washington over its post-pandemic monetary policies

Asian markets were lifted on Wednesday as stocks rallied globally after fresh pledges on monetary policy by the Federal Reserve.

Investors were reassured after being rattled last week by the bank’s forecasts of an earlier-than-flagged hike in interest rates.

Wall Street tanked on Friday and Asia followed suit on Monday as traders contemplated a rate lift-off possibly next year, with officials looking to prevent overheating and cap rising inflation caused by the world’s top economy thundering out of the collapse of 2020.

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Fears about the end of ultra-loose policies put in place at the height of the pandemic have haunted trading floors for months, knocking a more than year-long equity rally off stride.

But observers have now said that repeated Fed promises to maintain the measures until unemployment is tamed and inflation is running consistently hot appear to be sinking in.

On Wednesday, Fed chief Jerome Powell took his turn to calm the markets.

“We will wait for actual evidence of actual inflation or other imbalances,” he said.

Earlier in the day, New York Fed boss John Williams said talk of rate hikes remained “way off in the future”.

HEALTHY GAINS

All three main indexes on Wall Street ended with healthy gains for a second straight day with the Nasdaq at a record, and Asia took up the baton.

Hong Kong led the way rising 1.8%, while Taipei also piled on more than 1%.

There were also advances in Shanghai, Singapore, Seoul, Wellington, Manila and Bangkok, though Sydney, Mumbai and Jakarta fell while Tokyo was flat.

London, Paris and Frankfurt dipped in morning trade.

Bitcoin extended its rebound on Wednesday, sitting above $34,000 after a volatile day that saw it fall below $29,000 for the first time since January.

The unit has taken a hit this week after fresh moves to crack down on cryptocurrencies by China, while analysts warn it could well drop back to $20,000 – having only hit a record near $65,000 in April.

OIL GAINS

“Bitcoin’s continued sell-off has contributed to a negative outlook by traders driven by bearish news out of China,” said Nick Mancini, a crypto analyst at Trade The Chain. “The mood among traders is now continuing to sour.”

Oil prices extended gains to sit around multi-year highs on increasing optimism over demand as the world economy reopens and governments talk about easing quarantine measures, allowing easier overseas travel.

Analysts said the lack of progress on the Iran nuclear deal was also providing support as it puts off the return of supplies to the global market from the major producer.

Traders are now looking ahead to the next output meeting of OPEC and other key producers.

MARKETS

Tokyo – Nikkei 225: FLAT at 28,874.89 (close)

Hong Kong – Hang Seng Index: UP 1.8% at 28,817.07 (close)

Shanghai – Composite: UP 0.3% at 3,566.22 (close)

New York – Dow: UP 0.2% at 33,945.58 (close)