Asian markets follow Wall St higher on Fed rates promise

Asian stock markets have followed Wall Street higher after the U.S. Federal Reserve said it expects its key interest rate to remain near zero through 2023

Benchmarks in Shanghai, Tokyo and Hong Kong advanced. Sydney retreated.

The Fed’s promise to keep rates near rock bottom came even as it forecast this year’s economic growth will rebound to 6.5% — its strongest since the 1980s — and inflation will climb above 2% for the first time in years.

On Wall Street, the benchmark S&P 500 index rose 0.3% to a new high.

Fed Chairman Jerome Powell’s comments at a news conference appeared to reassure investors who worry higher inflation might prompt central banks to raise rates, which would weigh on economic growth.

“The market reaction suggests investors are satisfied with the Fed’s explanations for now,” said Tai Hui of JP Morgan Asset Management in a report. “Inflation is expected to rise in the coming months, and the Fed may need to provide more handholding to the market during this price spike.”

The Shanghai Composite Index rose 0.6% to 3,465.85 and the Nikkei 225 in Tokyo advanced 0.9% to 30,192.11. The Hang Seng in Hong Kong added 1.5% to 29,474.61.

The Kospi in Seoul advanced 0.7% to 3,068.01 while Sydney’s S&P-ASX 200 was off 0.7% at 6,745.90.

India’s Sensex rose 0.5% to 50,043.87. New Zealand also declined while Southeast Asian markets advanced.

Investors have been uneasy that inflation might accelerate after governments flooded sagging economies with extra spending and credit to reverse the deepest global slump since the 1930s.

Central banks traditionally respond to higher pressure for prices to rise by hiking interest rates. But Fed officials have said they would let the U.S. economy “run hot” to make sure a recovery is gaining traction.

Before his comments Wednesday, the yield on the 10-year U.S. Treasury bond, or the difference between its market price and the payout at maturity, widened to 1.68%, the highest level since January 2020.

Yields fell and stocks gained after Powell spoke.

The S&P 500 rose to 3,974.12, recovering from a 0.7% slide. The Dow Jones Industrial Average gained 0.6% to 33,015.37. The Nasdaq rose 0.4% to 13,525.20.

Banks, industrial stocks and companies that rely on consumer spending helped lift the market. Those gains outweighed a pullback in health care, utilities and other sectors.

Investors are betting big that the economic malaise will dissipate as spring arrives and more Americans get vaccinated against the coronavirus. The $1,400 stimulus checks the Biden administration began sending to individuals last weekend are also helping. But faster economic activity could also translate into some degree of inflation.

Fed policymakers foresee unemployment falling from 6.2% to 4.5% by year’s end and to 3.9% at the end of 2022.

That suggests the central bank will be close to meeting its goals by 2023, when it expects inflation to exceed its 2% target and for unemployment to be at 3.5%. Yet it still doesn’t project a rate hike then.

In energy markets, benchmark U.S. crude lost 36 cents to $64.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 20 cents on Wednesday to $64.60. Brent crude, the basis for international prices, retreated 41 cents to $67.59 per barrel in London. It declined 39 cents the previous session to $68.

The dollar edged up to 108.90 yen from Wednesday’s 108.86 yen. The euro declined to $1.1967 from $1.1979.

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