Sunday, December 5, 2021

Asian stocks rise after Fed says economic aid will stop

TOKYO (AP) – Asian stocks rose on Thursday as the US Federal Reserve announced it would end extraordinary aid to the economy it had provided since the early days of the pandemic.

Japan’s benchmark Nikkei 225 rose 0.7% to 29,729.44 in afternoon trade. South Korea’s Kospi rose 0.2% to 2,982.96. Australia’s S&P/ASX 200 gained 0.5% to 7,428.00. Hong Kong’s Hang Seng rose 0.1% to 25,058.95, while the Shanghai Composite rose 0.7% to 3,521.67.

Analysts said the Fed’s cues remained muted as well as fresh, reassuring global markets that interest rates are not going to be raised for some time.

“We found a ‘docish’ Fed move,” is the way Rabo Research portrayed the message.

But long-term concerns remain about Asian economies due to concerns there could be a sixth wave of coronavirus infections, despite rising signs of a return to normal economic activity and the free flow of people traveling to some countries. Eyes are also on expected earnings reports from an array of companies in Asia, including Japanese automakers and technology companies.

On Wall Street, the S&P 500 and the Dow Jones Industrial Average rose 0.6%, both marking their fifth straight gains. The Nasdaq climbed 1%, extending its winning streak to the eighth day. All three indexes set their latest record closing highs.

In a statement, the Fed said it would begin reducing Its $120 billion in monthly bond purchases over the coming weeks to $15 billion. If that momentum is maintained, the Fed could kick off its bond purchases as early as June. At that point, the Fed may decide to raise its key short-term interest rate, which affects many consumer and business loans.

The central bank reserves the right to change the rate at which it lowers bond purchases, aimed at holding long-term rates and lending and spending.

The Fed’s announcement was in line with what economists and markets had expected as the central bank moves to tackle inflation which is now likely to last longer than it was a few months ago.

“The majority of the bond tapering announcement was already in the markets and should have come as no surprise to anyone that the Fed has been signaling for much of this year,” said Chris Zacarelli, The Independent’s chief investment officer. Advisory Alliance. “But markets are already turning their attention to how quickly the Fed will start raising interest rates and how quickly they will raise them.”

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The S&P 500 closed 29.92 points higher at 4,660.57. The Dow closed at 36,157.58, up 104.95 points. The Nasdaq closed 161.98 points higher at 15,811.58. Shares of the smaller company outperformed the broader market in a sign that investors were feeling confident about economic growth. The Russell 2000 climbed 42.42 points, or 1.8%, to 2,404.28, its second straight all-time high.

The mix of technology stocks and companies that directly depend on consumer spending make up a large portion of the S&P 500’s gains. Adobe rose 2.3% and Tesla rose 3.6% to record highs.

Bond yields rose widely following the Fed’s statement. The yield on the 10-year Treasury note rose to 1.59% from 1.54% late Tuesday. It was trading at 1.57% shortly before the Fed released its policy statement.

The Fed’s latest statement and policy change comes amid rising inflation that has cut corporate operations and raised prices on raw materials. It is making finished goods more expensive, raising concerns about whether consumers will cut spending as prices rise.

At a news conference on Wednesday, Fed Chair Jerome Powell stressed that the outlook for inflation looks highly uncertain, limiting the Fed’s ability to formulate its policies in response. He suggested that inflation should slow down sometime next year as supply constraints ease, but the Fed cannot be certain it will.

Central banks and investors are also closely monitoring the recovery in the job market, which is lagging behind the macroeconomic recovery. The Labor Department will release its jobs report for October on Friday.

Benchmark US crude slipped 73 cents to $80.13 a barrel in energy trading. Internationally, Brent crude fell 50 cents to $81.49 a barrel.

In currency trading, the US dollar rose from 113.98 yen to 114.17 Japanese yen. The Euro is priced at $1.1586, which is less than $1.1610.

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AP Business Writers Damien J Trois and Alex Veega contributed.

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