TOKYO (AP) – Global stocks rallied on Thursday, boosted by the announcement of the US Federal Reserve System that it is beginning to roll back emergency aid to the economy since the early days of the pandemic.
France’s CAC 40 added 0.5% in early trading to 6,984.21, while Germany’s DAX rose 0.5% to 16,035.43. Britain’s FTSE 100 rose 0.3% to 7270.02. US stocks were expected to rise, with Dow futures up nearly 0.1% to 36,054.00. S&P 500 futures also rose to 4,661.25, up 0.2%.
Japanese benchmark Nikkei 225 Index added 0.9% to 29,794.37 points. South Korean Kospi added 0.3% to 2983.22. The Australian S & P / ASX 200 Index rose 0.5% to 7,428.00. The Hong Kong Hang Seng added 0.8% to 25,225.19 and the Shanghai Composite rose 0.8% to 3,526.87.
Analysts believe that the signals from the Fed are still “dovish” as well as “hawkish” in nature, reassuring world markets that interest rates will not rise for some time.
“We got a bald Fed move,” RaboResearch described the message.
But long-term concerns over Asian economies remain amid fears that a sixth wave of coronavirus infections could occur, despite growing signs of a return to normal economic activity and a freer flow of people traveling in some countries. They are also closely following the profit and loss statements expected from a number of companies in Asia, including Japanese automakers and technology companies.
The Fed said in a statement that it will begin cutting $ 120 billion in monthly bond purchases by $ 15 billion a month in the coming weeks. If this pace continues, the Fed could stop buying bonds as early as June. At this point, the Fed may decide to raise the key short-term interest rate, which affects many consumer and business loans.
The central bank reserved the right to change the speed at which it is cutting back on bond purchases, which were intended to contain long-term rates and stimulate borrowing and spending.
The Fed’s announcement was in line with economists ‘and markets’ expectations as the central bank takes steps to tackle inflation, which is now likely to persist longer than it did just a few months ago.
Bond yields generally rose following the Fed’s announcement. The yield on the 10-year Treasury bond rose to 1.59% from 1.54% on Tuesday night. It was trading at 1.57% shortly before the Fed released its policy statement.
The latest announcement and policy change from the Fed comes amid a steady rise in inflation, which has affected corporate operations and raised commodity prices. It also increases the cost of finished goods, raising concerns about whether consumers will cut their costs as prices rise.
At a press conference on Wednesday, Fed Chairman Jerome Powell stressed that the outlook for inflation looks very uncertain, limiting the Fed’s ability to adapt its policies in response. He suggested that inflation should slow down sometime next year as the supply deficit eases, but the Fed cannot be sure that this will happen.
The central bank and investors are also closely monitoring the job market recovery, which has lagged behind the overall economic recovery. On Friday, the Labor Department is to publish its October employment report.
In energy trading, the US benchmark oil rose 29 cents to $ 81.15 a barrel. Brent crude, the international standard, added 73 cents to $ 82.72 a barrel.
In foreign exchange trading, the US dollar rose to 114.10 Japanese yen from 113.98 yen. The euro was worth $ 1.1557 compared to $ 1.1610.
Contributions were made by AP Business Writers Damian J. Troyes and Alex Veiga.