Asian stocks rise before Bank of Japan decision as Fed remains patient

Businessmen walk past the Bank of Japan (BOJ) building in Tokyo, Japan, on March 23, 2016.
Businessmen walk past the Bank of Japan (BOJ) building in Tokyo, Japan, on March 23, 2016. PHOTO: REUTERS

SYDNEY (BLOOMBERG) - Asian stocks rose for the first time in five days on Thursday (April 28) as the Federal Reserve calmed investors with a signal it will gradually increase interest rates and traders awaited the end of a Bank of Japan meeting.

The MSCI Asia Pacific Index gained 0.3 per cent to 131.76 as of 9:02 am in Tokyo. All eyes now turn to the Japanese central bank, which is expected to boost stimulus amid concern a stronger yen is derailing Prime Minister Shinzo Abe's reflation program. US crude held above US$45 a barrel following a two-day surge, and copper futures rallied, buoying commodity producers.

The Fed omitted previous language in its statement that "global economic and financial developments continue to pose risks," tacitly nodding to improvement in financial markets, and instead said officials will "closely monitor" such developments. The Fed reiterated that it will probably raise rates at a "gradual" pace. The tone was more hawkish, increasing the probability of a rate increase in June, said Mohamed Aly El- Erian, chief economic adviser at Allianz SE in New York.

"We've got a bit of certainty now that the Fed will raise rates gradually," Niv Dagan, executive director at Peak Asset Management LLC in Melbourne, said by phone. "There will be further support from the Bank of Japan later today. It's a positive move and additional stimulus will provide a boost for equities."

Fifty-six per cent of the economists surveyed by Bloomberg predict more stimulus from the BOJ on Thursday. Of the 41 respondents, 19 predict the BOJ will announce an increase in ETF purchases, eight expect an acceleration of bond purchases and eight project a deeper cut in the negative interest rate on excess reserves. Some 93 per cent of economists forecast further easing by the end of July.

Japan's Topix index rose 0.9 per cent as the yen held losses. A policy decision is likely between noon and 1 pm in Tokyo, and will be accompanied by the BOJ's latest estimates for growth and inflation. Governor Haruhiko Kuroda holds a press briefing about 3:30 pm local time. The nation's stock market is closed on Friday and May 3-5.

Australia's S&P/ASX 200 Index climbed 0.3 per cent while South Korea's Kospi index gained 0.2 per cent.

Futures on Hong Kong's Hang Seng Index rose 0.3 per cent and contracts on the Hang Seng China Enterprises Index of mainland firms listed in the city advanced 0.4 per cent.

Futures on the Standard & Poor's 500 Index rose 0.1 per cent. The gauge added 0.2 per cent, climbing for a second day on Wednesday as energy producers rallied after oil surged above US$45 a barrel in a whipsaw session. Those gains helped to offset losses among technology companies after Apple Inc tumbled the most since January as its results disappointed.