Asian stocks were set for modest gains on Thursday after the Federal Reserve pledged to keep monetary policy and rates unchanged and projected a rapid jump in U.S. economic growth this year as the COVID-19 crisis eases.
Japan’s Nikkei 225 futures added 0.12%, while Hong Kong’s Hang Seng index futures rose 0.68%.
Australia’s S&P/ASX 200 index, however, dipped 0.1% in early trading while E-mini futures for the S&P 500 rose 0.08%.
While inflation is expected to reach 2.4% this year, above the central bank’s 2% target, Fed Chair Jerome Powell called it a temporary surge that will not change the Fed’s pledge to keep its benchmark overnight interest rate near zero.
“If the Fed isn’t going to induce tightening, it’s very bullish for risky assets,” said Teresa Kong, head of fixed income and portfolio manager at Matthews Asia. “We should be seeing a mild rally in Asian assets and currencies.”
The Fed projected the U.S. economy will grow by 6.5% this year – the largest annual output growth since 1984 – thanks in part to massive federal fiscal stimulus and optimism around the success of coronavirus vaccines.
“It’s sort of shocking … that officially the United States government believes it will grow faster than the Chinese government believes it will grow this year,” said Christopher Smart, chief global strategist at Barings Investment Institute in Boston, calling it a “head-turning moment for investors.” The S&P 500 closed at a record high and the Dow Jones Industrial Average closed above 33,000 points for the first time on Wednesday, bolstered by the Fed’s strong economic forecast and Powell’s comments that it is too early to discuss tapering-off measures. The Dow Jones Industrial Average rose 0.58%, while the S&P 500 gained 0.29%.
The Nasdaq Composite climbed 0.4% and remains down about 4% from its Feb. 12 record-high close.
The pan-European STOXX 600 index lost 0.45% and MSCI’s gauge of stocks across the globe gained 0.22%.
Emerging market stocks lost 0.46%.
The benchmark 10-year Treasury note US10YT=RR, last fell 4/32 in price to yield 1.6462%. The dollar index dropped 0.5% to 91.405 after the Fed comments. The euro rose 0.7% against the dollar to $1.1978. Against the yen, the dollar fell 0.1% to 108.87 yen.
The Australian dollar rose 0.08% versus the greenback at $0.780. Oil slipped for the fourth day on Wednesday, weighed down by rising U.S. crude inventories and by expectations of weaker demand in Europe, where the vaccine roll out is faltering. Brent crude settled 39 cents, or 0.6% lower, at $68 a barrel, and U.S. West Texas Intermediate (WTI) crude dropped 20 cents, or 0.3%, to end at $63.68.