Asian markets rallied yesterday after US Federal Reserve Chairman Ben Bernanke warned that the US economy was still fragile and said the bank would keep easy monetary policy in place.
While his comments played down recent strong jobs growth figures, traders on Wall Street jumped on them, and the prospect of more US dollars floating around the market sent the greenback lower against the euro.
Tokyo surged 2.36 percent, or 236.91 points, to 10,255.15, its highest level since the quake and tsunami on March 11 last year.
Photo: AFP
Sydney rose 0.90 percent, or 38.5 points, to 4,301.3 and Seoul climbed 1.02 percent, or 20.57 points, to 2,039.76.
Hong Kong shares closed 1.83 percent higher, with the Hang Seng Index jumping 378.05 points to 21,046.91, while Chinese shares ended down 0.15 percent, with the Shanghai Composite Index, which covers both A and B shares, slipping 3.42 points to 2,347.18.
In Taipei, the TAIEX ended 0.78 percent, or 61.84 points, higher at 8,029.46.
“A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed,” Bernanke said in a speech on the outskirts of Washington.
However, he said “conditions remain far from normal,” adding that “we cannot yet be sure that the recent pace of improvement in the labor market will be sustained.”
“Improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said.
The Fed has held interest rates at record lows since the global financial crisis, while it has also bought US bonds to force down long term rates.
There had been talk that recent falls in unemployment could lead the bank to start tightening policy as early as the second half of this year.
“Basically, Bernanke lit a flame under the market and we’ve seen risk on,” Macquarie Equities Investment Advisor Brad Gordon said in Auckland, according to Dow Jones Newswires.
On Wall Street, the Dow rose 1.23 percent, the S&P 500 gained 1.39 percent and the tech-rich NASDAQ added 1.78 percent.
European shares rose yesterday morning, with banking stocks the major risers on reports of talks about a Royal Bank of Scotland stake sale to Abu Dhabi investors and expectations of further monetary easing in the US.
The pan-European FTSEurofirst 300 index of top shares was up 0.7 percent at 1,096.40 points by 8:40am, having risen 0.9 percent on Monday after comment by Bernanke, which made it clear easy monetary policy would remain in place for some time to support the fragile recovery.
“It is a significantly more dovish tone from Bernanke, which will give a boost for stocks. The prospect of easy monetary policy will help the housing market in the United States,” said Guy Foster, head of portfolio strategy at Brewin Dolphin. “It will also have a knock-on effect to corporate financing and improve the terms of real-estate loans. We are staying positive on risk and have a bias in favor of US equities over European.”
The euro surged against the US dollar in New York trade, with the European unit also getting support from the closely watched IFO index of business confidence, which rose for a fifth straight month to its highest level since July last year.
The common currency jumped to US$1.3356 late on Monday, from US$1.3262 earlier in Asia.
Yesterday morning in Tokyo, it was at US$1.3350. It was also at ¥110.60, compared with ¥110.68. The US dollar was at ¥82.86 from ¥82.87.
On oil markets, oil prices hovered above US$107 a barrel -yesterday in Asia as an agreement between Iran and six world powers to meet next month raised hopes of a negotiated resolution to a dispute over the Middle Eastern country’s nuclear program.
Benchmark oil for May delivery was up US$0.09 to US$107.12 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract was up US$0.16 to settle at US$107.03 per barrel in New York on Monday.
Brent crude for May delivery was down US$0.09 at US$125.56 per barrel in London.
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