Stocks across Asia-Pacific jumped following a rebound on Wall Street and oil rose to its highest level in two years as investors were reassured by signals that the Federal Reserve would continue to support the economic recovery from the coronavirus pandemic.
In afternoon Asia trading on Tuesday, Japan’s Topix rose 3.1 per cent and Australia’s S&P/ASX 200 climbed 1.8 per cent. India’s benchmark Sensex index rose as much as 0.8 per cent to a record, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed 0.5 per cent.
The moves followed a bounce for US stocks on Monday, with the S&P 500 closing up 1.4 per cent. US shares tumbled last week after the Federal Reserve pivoted to a more hawkish tone, prompting fears that interest rate rises could derail the global economic recovery.
But market sentiment got a boost on Monday from more dovish commentary from Fed officials including chair Jay Powell, who in prepared remarks ahead of congressional testimony on Tuesday said the central bank “will do everything we can to support the economy for as long as it takes to complete the recovery”.
John Williams, president of the Federal Reserve Bank of New York, also said that the US economy was not ready yet for the central bank to start pulling back its hefty monetary support.
Jean Boivin, head of the BlackRock Investment Institute, said that “the Fed’s new outlook will not translate into significantly higher policy rates any time soon”.
“We may see bouts of market volatility . . . but we advocate staying invested and looking through any turbulence,” Boivin added.
Futures for the S&P 500 rose 0.2 per cent during Asia trading on Tuesday, while those for London’s FTSE 100 were up 0.3 per cent.
Commodities prices, which were pummeled last week on concerns for the global economic outlook, also rose. Brent crude, the international oil benchmark, edged up 0.3 per cent to $75.14 a barrel, crossing the $75 mark for the first time since April 2019.
Brent is up over 50 per cent this year, underscoring strong demand ahead of next week’s Opec+ meeting.
Bitcoin stabilised after dropping sharply in response to a warning from the People’s Bank of China on Monday that the country’s state banks and payment platforms must “investigate and identify” accounts facilitating cryptocurrency trading and block all such transactions.
The cryptocurrency rose 1 per cent to $32,881 on Tuesday but remains down 6.5 per cent this month.
Bond markets steadied after yields, which move inversely to prices, shot higher on Monday as investors abandoned the safety of government debt and dove back into stocks. Yields on the 10-year US Treasury were steady at 1.492 per cent in Asian trading.