Asian stocks tracked Wall Street’s gains on Thursday, as comments from Federal Reserve Chairman Jerome Powell raised expectations of a September interest rate hike, leading to another record high.
Hong Kong and Shanghai, which have struggled in recent weeks on concerns about the Chinese economy, also rose as investors looked ahead to a key meeting of the Chinese Communist Party next week.
In his second day of testimony to lawmakers, Powell said policymakers would not wait until inflation hits the central bank’s 2% target before easing monetary policy, adding that “if we wait that long, we’ve probably waited too long.”
His comments came ahead of the release of the latest consumer price index on Thursday, which forecasts a further economic slowdown.
Traders are increasingly betting the Fed will cut borrowing costs within two months, and analysts say Chairman Powell has signaled to the market that the decision has been made.
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The comments eased recent concerns among investors that a still-strong labor market and inflation running above 2 percent might lead authorities to keep interest rates at their highest in two decades for some time to come.
The S&P 500 hit a new record high for the sixth consecutive year, and the Nasdaq also closed at an all-time high.
And the upbeat mood spread to Asia, with Hong Kong rising more than 1%, and Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Wellington also rising.
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Attention is also on China’s Third Plenary Session, which begins on Monday, where government officials including President Xi Jinping are expected to discuss ways to reinvigorate the world’s second-largest economy as it faces an ongoing real estate crisis and geopolitical challenges.
But while there are hopes of some big policy announcements, commentators remain cautious.
Andrew Batson of Beijing-based consultancy Gavekal Dragonomics told AFP he did not expect a “radical departure from the course already set out by President Xi” in which technological self-sufficiency and national security would take precedence over economic growth.
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Nomura’s Ting Lu added that the meeting was “aimed at generating and discussing large-scale, long-term ideas and structural reforms, rather than making short-term policy adjustments.”
The meeting comes amid continuing concerns that authorities are not providing enough support to economic growth which beat expectations in the first quarter of this year and is expected to exceed the government’s target of 5 percent in the April-June period.
Taylor Nugent of National Australia Bank warned that “further monetary easing is constrained by an unwillingness to allow the yuan to depreciate further, so expectations are low for a major policy shift at the Third Plenum.”
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Tokyo – Nikkei Stock Average: up 0.8% to 42,179.84 (break)
Hong Kong – Hang Seng Index: up 1.3% to 17,697.76
Shanghai Composite Index: up 0.8% to 2,962.89
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EUR/USD: Up to $1.0840 from $1.0833 on Wednesday
Pound/dollar: up from $1.2848 to $1.2862
USD/JPY: down from 161.71 to 161.58
EUR/GBP: down from 84.29p to 84.27p
West Texas Intermediate: Up 0.8% to $82.79 a barrel.
Brent crude: up 0.9% to $85.81 per barrel
New York – Dow Jones Industrial Average: up 1.1% to 39,721.36 (closing price)
London – FTSE 100: up 0.7% to 8,193.51 (close)
