Asia report: Most markets rise on back of Fed tapering news

Most markets were higher in Asia on Thursday, taking their cue from a stunning turnaround on Wall Street overnight, after the Federal Reserve confirmed plans to taper its bond-buying programme more aggressively in the face of rising ongoing price inflation.

In Japan, the Nikkei 225 was up 2.13% at 29,06.32, as the yen weakened 0.09% against the dollar to last trade at JPY 114.14.

Of the major components on the benchmark index, robotics specialist Fanuc was up 2.34%, Uniqlo owner Fast Retailing added 3%, and technology giant SoftBank Group was 0.41% firmer.

The broader Topix index added 1.46% by the end of trading in Tokyo, closing at 2,013.08.

On the mainland, the Shanghai Composite advanced 0.75% to 3,675.02, and the smaller, technology-centric Shenzhen Composite was 0.62% firmer at 2,559.31.

South Korea’s Kospi managed gains of 0.57% to 3,006.41, while the Hang Seng Index in Hong Kong eked out an advance of 0.23% to 23,475.50.

Seoul’s blue-chip technology stocks managed positive finishes, with Samsung Electronics up 0.26% and SK Hynix rising 0.4%.

The moves in Asia came on the back of a positive session stateside overnight, after the Federal Reserve confirmed it would taper its bond-buying stimulus programme to end by next March.

Its so-called ‘dot plot’ of its members’ median projections for interest rates also suggested three 25 basis point hikes were likely next year and in 2023, and two in 2024.

The move to taper and towards tightening came as the Fed faced enormous pressure to rein in spiralling prices, with consumer inflation coming in at a 39-year high earlier in the week.

“Is the Santa Rally finally here? Markets certainly seem to have a spring in their step, with the major indices across Europe, Asia and the US all pushing forward,” said Russ Mould, investment director at AJ Bell.

“The US Federal Reserve’s monetary policy update last night has gone down well with the markets.

“The prospect of three US interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control.”

Mould said that equally, it wasn’t being too aggressive to trip up the economy.

“This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets.”

Oil prices were higher as the region went to bed, with Brent crude last up 0.95% at $74.58 per barrel, and West Texas Intermediate ahead 1.1% at $71.65.

In Australia, the S&P/ASX 200 went against the regional trend, falling 0.43% to 7,295.70, after the Reserve Bank of Australia governor said interest rates would not be hiked until inflation was sustained in the 2% to 3% target range, which was unlikely next year.

“We are still a fair way from that point. In our central scenario, the condition for an increase in the cash rate will not be met next year,” Philip Lowe said while addressing an accounting industry forum.

The central bank was prepared to taper or possibly end its bond purchases next year, however, if Australia’s economic recovery met the central bank’s goals.

Fresh data out of the sunburnt country showed a huge 366,000 rise in seasonally-adjusted employment in November, as many parts of Australia came out of Covid-19 lockdown restrictions.

Sydney’s bourse was joined on the negative side of the ledger by New Zealand’s S&P/NZX 50, which lost 0.71% to 12,777.54.

The down under dollars were both stronger on the greenback, with the Aussie last off 0.39% at AUD 1.3888, and the Kiwi retreating 0.46% to last trade at NZD 1.4670.