Asian stocks track US bounce on dovish Fed as oil extends jump, STI up 1.3%

Asian stocks rose on Thursday after the Federal Reserve pared back expectations for interest-rate increases this year.
Asian stocks rose on Thursday after the Federal Reserve pared back expectations for interest-rate increases this year. PHOTO: AFP

WELLINGTON, TOKYO (BLOOMBERG) - The Federal Reserve provided a shot in the arm for riskier assets, with Asian stocks rebounding as oil rallied with high-yielding currencies after US officials scaled back their interest-rate strategy amid concern over the global outlook. The US dollar nursed losses.

Asia's equity benchmark headed for its steepest climb in two weeks, rising with US index futures after the Fed pared back the number of rate increases it anticipates enacting in 2016 to two from four.

The MSCI Asia Pacific Index rallied 1.6 per cent as of 9:43 am Tokyo time, rising for the first time in three days as Japan's Topix index gained 1.3 per cent.

Singapore's Straits Times Indexwas up 1.29 per cent at 2,881.02 as of 9:42 am.

The Kospi index in Seoul increased a second day, adding 1 per cent. Australia's S&P/ASX 200 Index gained 1.3 per cent, with commodity shares rising at least 3 per cent.

Standard & Poor's 500 Index futures climbed 0.2 per cent following the U.S. benchmark's 0.6 per cent advance.

"The Fed has clearly been rattled by the nasty selloff seen at the start of 2016," Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. "This was far more dovish than markets had expected. Asia is looking to open strongly in the wake of the Fed decision."

In their much-anticipated statement, Fed officials cited the potential impact from weaker global growth and financial- market turmoil on the US economy for keeping the target range for the benchmark federal funds rate between 0.25 per cent and 0.5 per cent.

The third major central-bank policy event in a week, the Fed's March meeting came in the wake of major stimulus announcements from policy makers in Europe and Japan that received a mixed reception in markets worldwide. The Bank of England meets Thursday.

Oil's rebound is also buoying sentiment, with overtures from Opec members and other energy producers to meet over output sending US crude above US$39 a barrel on Wednesday.

The Fed also lowered its median projection for US growth in 2016 and next year, and the median of policy makers' quarterly projections implies two 25 basis-point increases this year, down from four forecast in December. Chair Janet Yellen said in February that market turbulence had "significantly" tightened financial conditions by pushing down stock prices, spurring the US dollar to strengthen and boosting some borrowing costs.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after sliding 1.1 per cent on Wednesday to its lowest close since Oct. 20.

"The mantra we follow as investors is don't fight the Fed, but it feels like what the Fed is saying now is don't fight the market" on the rate path, said Matthew Whitbread, a Boston-based investment manager at Baring Asset Management.

The yen was paring back some of the past two days' gains, losing 0.3 per cent to 112.87 per dollar. The euro was steady at US$1.1214 after gaining 1 percent last session, while the pound traded at US$1.4254 following its first increase this week. The Bank of England is projected to hold rates on Thursday and maintain current stimulus levels.

The Korean won led gains in Asia, rising 1.5 per cent as the Malaysian ringgit jumped 1.3 per cent. The Thai baht was up 0.3 per cent.

Data also boosted Australia's dollar, which headed for its strongest close since July after the nation's jobless rate declined more than economists had projected.