Asian stocks follow Wall St higher after UK calms markets

Beijing, September 29 (BNA) Asian stock markets followed Wall Street higher on Thursday after the Bank of England moved aggressively to stem an emerging financial crisis.

Market indices in Hong Kong, Seoul and Sydney added more than 1%. Shanghai and Tokyo also rose. Oil prices fell after jumping more than $3 a barrel the previous day.

Wall Street’s benchmark S&P 500 index surged 2% on Wednesday, posting its biggest gain in seven weeks after the Bank of England announced it would buy as many government bonds as needed to restore order in financial markets, the Associated Press (AP) reported.

This helped assuage investor fears that the planned UK tax cuts would drive up already high inflation. This caused the value of the pound to fall to its lowest level since the 1970s and bond prices to plummet.

“The short-term risk of a major financial mishap has been reduced,” Invesco’s David Chow said in a report. The focus will return to the still pressing macro challenges facing the major economies.

The Shanghai Composite rose 0.3% to 3053.33 and the Nikkei 225 in Tokyo rose 0.7% to 26365.36. Hong Kong’s Hang Seng jumped 1.3% to 17466.89.

Seoul’s Kospi rose 1.3% to 2196.97 and Sydney’s S&P ASX 200 rose 1.8% to 6,577.70.

New Zealand and Southeast Asia markets also advanced.

On Wall Street, the S&P 500 rose to 3,719.04 after the Bank of England said it would buy bonds over the next two weeks to stem the price slide. Investors have been nervous about plans for 45 billion pounds ($48 billion) in tax cuts with no spending cuts.

The central bank earlier warned that faltering confidence in the economy posed a “material risk to the UK’s financial stability”. The International Monetary Fund took the rare step of urging a member of the Group of Seven advanced economies to drop his plan for tax cuts and more borrowing.

The Dow Jones Industrial Average rose 1.9% to 29683.74. The Nasdaq Composite Index rose 2.1% to 11,051.64.

Despite Wednesday’s gains, the S&P 500 is down more than 20% from its January 3 record, putting it in what traders call a bear market.

Forecasters expect more turmoil ahead due to fears of a possible recession, higher interest rates, and even higher inflation.

The yield on 10-year US Treasuries, or the difference between the market price and payment if held to maturity, briefly exceeded 4% on Wednesday, its highest level in a decade.

Investors are increasingly concerned that large interest rate increases this year by the Federal Reserve and central banks in Europe and Asia to cool multi-decade inflation could push the global economy into recession.

Investment giant Vanguard puts the chance of a US recession at 25% this year and 65% next year If the Fed follows expectations, it will raise rates again and keep them high over the next year.

In energy markets, benchmark US crude lost 42 cents to $81.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $3.65 on Wednesday to $82.15. Brent crude, the price basis for global oil, slipped 44 cents to $87.61 a barrel in London. It gained $3.05 in the previous session to $89.32.

The dollar rose to 144.43 yen from 143.96 yen on Wednesday. The euro fell to 96.85 cents from 97.43 cents.

HF