Most Asian markets bounce on soothing Fed rate talk

asia-marketHONG KONG: Asian markets mostly rose Tuesday after the previous day’s hammering as a leading Federal Reserve official tempered comments from her colleagues on the need for an early interest rate hike.

However, lingering concerns about the future for central bank policy easing after years of cheap cash are keeping investor confidence in check.

Traders welcomed comments from policy board governor Lael Brainard that the case for lifting borrowing costs early was “less compelling”.

She said the US central bank should adopt a “moderate and gradual” approach to lifting rates and avoid moves to “tighten policy pre-emptively.”

The remarks were a much-needed comfort for markets after a sell-off fuelled Friday by Boston Fed President Eric Rosengren and governor Daniel Tarullo, who signalled their openness to a September move.

Their comments sent US and European stocks tumbling Friday and hammered Asian equities Monday. However, Wall Street bounced back after the weekend, providing a strong lead for Asia.

Hong Kong rose 1.1 percent, chipping away at the 3.4 percent plunge suffered Monday, while Tokyo ended the morning slightly higher.

Sydney added 0.3 percent and Seoul was up 0.5 percent.

“With Brainard’s remarks, rate-hike expectations have backed down. It seems that the slump in US equities last week was a bit overdone,” Toshihiko Matsuno, a senior strategist at SMBC Friend Securities Co. in Tokyo, told Bloomberg News.

“But the market isn’t likely to take on an aggressive buying mode before the results from the (Bank of Japan’s) and the Fed’s monetary policy meetings next week.”

With expectations for a rate rise reduced slightly the dollar dipped against its peers, easing to 101.61 yen from 101.85 yen in New York, while the Australian dollar jumped 0.7 percent and the South Korean won added 0.2 percent.

Malaysia’s ringgit, the Singapore dollar and Indonesian rupiah also each posted healthy gains.

Shanghai reversed early losses to sit flat after the government released another batch of positive data suggesting the world’s number two economy is stabilising.

Retail sales, a key measure of consumer spending, and industrial output raced ahead in August from the previous month and beat expectations. Last week investors welcomed strong trade and inflation figures

The figures come as authorities try to move the economy from a reliance on investment spending and exports to one driven more by consumer demand, although the transition has proven bumpy and gross domestic product growth is slowing.

“Economic activity has evidently stabilised in recent months, and gone are, for now, worries about a hard-landing,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong, before the data.

But he pointed out that the improvement came after “a hefty dose of fiscal easing” and the “trick will be to get the private sector to pick up the baton: stimulus can’t carry growth forever”.