Singapore, Feb 2 (BNA): Asian stocks rose on Thursday while the dollar slipped after Federal Reserve Chairman Jerome Powell said an “anti-inflationary” process was under way, boosting risk appetite as investors hope the rise in US interest rates will end. So.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.91% on Thursday. Reuters reports that after shedding nearly 20% last year, the index is up nearly 11% this year and just had its best January performance since 2012.
Japan’s Nikkei rose 0.10%, while Australia’s S&P/ASX 200 rose 0.14%. Chinese stocks rose 0.11%, while Hong Kong’s Hang Seng Index gained nearly 1%.
Futures indicated that European equities were likely to continue higher, with Eurostoxx 50 futures up 0.74%, German DAX futures up 0.74% and FTSE futures up 0.46%.
The US Federal Reserve has announced an expected 25 basis point interest rate increase after a year of big increases and said it has become a mainstay in the fight against rising inflation. But policy makers anticipate the need for “continued increases” in borrowing costs.
However, the market took a cautious cue from Powell’s remarks to a press conference about the ongoing “low inflation” process. This helped the S&P 500 and Nasdaq close sharply higher overnight.
Ali Hassan, portfolio manager and managing director at Thornburg Investment Management, said Powell appeared to dismiss easy financial conditions as a concern in his news conference. “This was a green light that the market could buy into without feeling like they were fighting the Fed.”
The prospect of a less drastic pace of monetary tightening raised expectations of a so-called soft landing – a scenario in which inflation eases against the backdrop of weak but resilient economic growth.
Powell said on Wednesday that his hopes for a soft landing in the economy, despite sharp interest rate increases, remain.
“From now on, data will have more weight than what (Powell) says,” said Charo Chanana, a market analyst at Saxo Markets in Singapore.
“So it is likely that the risk-based rally will have room to run until economic data surprises significantly to shake up the soft landing story that the market relies on.”
The focus will now turn to the European Central Bank (ECB) and Bank of England (BOE) meetings scheduled for Thursday and the interest rate path the two central banks are likely to take.
Strategists at Saxo Markets said the ECB has been outpacing its peers in tightening recently, and is likely to repeat that this week. The Bank of England will probably be the hardest to predict the indecisive market pricing as well as the scope for the separate vote, they said.
In the corporate world, Meta Platforms has unveiled tighter cost controls this year and $40 billion in new stock buybacks, with CEO Mark Zuckerberg calling 2023 “the year of efficiency.”
Meta stock jumped after the market traded, lifting Nasdaq futures by 1%. E-mini futures for the S&P 500 rose 0.34%. All eyes will be on earnings from Apple and Amazon later on Thursday.
In the currency market, the dollar edged lower after Powell’s comments, as the US dollar index, which tracks the currency against six major peers, fell to a nine-month low of 100.80 on Wednesday. The last time was at 100.89 on Thursday.
The euro rose 0.27% to $1.1019. The yen strengthened 0.41% to 128.43 per dollar, while the pound sterling was last trading at $1.2388, up 0.10% on the day.
Spot gold rose 0.2% to $1,953.44 an ounce, after touching a nine-month high of $1,957 an ounce earlier.
US West Texas Intermediate crude rose 1.06% to $77.22 a barrel, and Brent crude was $83.59, up 0.91% on the day.