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Asian markets recover from one-month low; all eyes on Fed

Asian markets recover from one-month low; all eyes on Fed
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First Published: Wed, Jun 24 2009. 11 53 PM IST

 Improving economy: An investor looks at the stock price monitor at a private securities company in Shanghai on Wednesday. Shanghai’s main index rose 1% to a one-year closing high, led by metal and st
Improving economy: An investor looks at the stock price monitor at a private securities company in Shanghai on Wednesday. Shanghai’s main index rose 1% to a one-year closing high, led by metal and st
Updated: Wed, Jun 24 2009. 11 53 PM IST
Hong Kong: Asian stocks bounced up on Wednesday from a one-month low hit the previous day while the dollar drifted, with investors bracing for a US Federal Reserve decision and any signs the central bank is worried about the jump in US bond yields.
Improving economy: An investor looks at the stock price monitor at a private securities company in Shanghai on Wednesday. Shanghai’s main index rose 1% to a one-year closing high, led by metal and steel shares. Eugene Hoshiko / AP
Taiwan’s TAIEX index led the gains in Asia, jumping 3% on speculation that the country will sign an agreement with China that could spur investment in its financial industry.
The rise in stocks was limited across the continent before the outcome of the Fed meeting.
The US central bank is widely expected to keep interest rates on hold at a record low and keep its planned debt purchases unchanged. So the focus is on whether it tweaks its statement to rein in a slide in US treasurys that has threatened the economy’s budding recovery.
Benchmark treasury yields surged to an eight-month peak above 4% earlier in the month, pushing up mortgage rates and offsetting the Fed’s efforts to help the economy by buying hefty amounts of government and mortgage-related debt.
Investors have started to question how the Fed will step back from its array of emergency programmes to stem the crisis and whether its quantitative easing will stoke inflation.
“The Fed will likely attempt to assure markets that it will have a credible exit strategy when the time is right,” said analysts at Calyon in a note to clients.
The dollar found its footing after a sharp slide the previous day, the latest volatile move across markets in the last days of the second quarter. Government bonds also have recovered on building doubts about the strength of any economic recovery. Japan’s 10-year government bond yield hit a three-month low.
The MSCI index of Asia-Pacific shares outside Japan climbed around 2%, steadying after hitting a one-month low the previous day.
Financials and technology shares led gains. Taiwan’s Cathay Financial was up 6.9%, while South Korea’s LG Display rose 2.7%.
Japan’s Nikkei average climbed 0.4%, underpinned by a rise in energy shares such as Inpex after a jump in oil prices the previous day.
The market shrugged off Japanese data showing exports tumbled 40.9% in May from a year earlier, underscoring that any recovery in global trade is going to be a slow one.
Hong Kong shares rose 2%, with advancing stocks outnumbering decliners three-to-one, but turnover slid to a one-month low ahead of the Fed outcome.
Shanghai’s main index rose 1% to a one-year closing high, led by metal and steel shares, as more signs pointed to an economic recovery.
Singapore rose 2.4% while Indian and Australian shares made more modest gains.
Crude oil backed down in Asia, slipping below $69 a barrel.
Despite the slight gains in stocks, Japanese government bonds (JGBs) extended their winning streak as portfolio managers have reinvested funds from $105 billion (around Rs5 trillion) of maturing bonds this month, analysts said.
A solid auction of two-year treasurys on Tuesday also helped boost JGBs.
The 10-year JGB yield dropped 2.5 basis points to 1.38%, the lowest since early April. One basis point is one-hundredth of a percentage point.
The yen fell across the board on expectations that the launch of new Japanese mutual funds targeting foreign assets would draw hefty subscriptions from household investors. The dollar was broadly lower on expectations the Fed would emphasize it was in no hurry to raise rates.
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First Published: Wed, Jun 24 2009. 11 53 PM IST
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