Moneycontrol
Apr 26, 2012 09:29 AM IST | Source: Reuters

Fed's reassurance, earnings optimism lift global shares

Asian shares gained on Thursday, retaining positive momentum as the Federal Reserve reassured markets that it will keep its very accommodative stance to support growth.


Asian shares gained on Thursday, retaining positive momentum as the Federal Reserve reassured markets that it will keep its very accommodative stance to support growth, and optimism grew over strong corporate earnings after Apple Inc's robust results.


Fed Chairman Ben Bernanke on Wednesday said US monetary policy was "more or less in the right place" even though the central bank would not hesitate to launch another round of bond purchases if the economy were to weaken.


Also Read: F&O Expiry: Will these stocks give market momentum today?


The Fed also adjusted its economic forecasts to acknowledge an improving labour market and slightly higher inflation over the next few years, suggesting the central bank has grown somewhat less inclined to take more action to help the economic recovery.


The dollar measured against a basket of major curencies fell to a three-week low on Wednesday, boosting the euro to USD 1.3237. The euro stood at USD 1.3230 early on Thursday.


MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.4% while Japan's Nikkei average opened up 0.6%.


"The totality of all new Fed communications ... have reinforced the idea that the policy bias is currently neutral and that the outlook remains highly dependent on incoming data," said Societe Generale in a note.


"There were a few vague and seemingly conflicting signals in today's communications, which probably reflect the difficulty in reconciling the very diverse views within the FOMC," it said.


Along with the Fed's assurance that its very easy monetary policy will be kept in place as long as needed, US stocks rallied on Wednesday, with Apple's surge giving the Nasdaq its biggest gain of the year and fuelling expectations for better earnings results across the sectors.


About 75% of the 200 companies in the S&P 500 that have reported results so far have exceeded expectations.


European shares also rose on strong earnings results.


There was some skepticism that Asia may not see as big a gain as in overnight US and European markets.


"Good news all around, but shares won't exactly be set alight as some of the momentum from Apple's earnings surprise was already priced in on Wednesday, and Ben Bernanke's comments were quite neutral despite leaving the door open to further easing," said Kim Hak-gyun, an analyst at Daewoo Securities.


In Japan, the corporate picture looks less certain, with Ninetendo likely to report its first ever operating loss after the close on Thursday as it faces stiff competition from Apple and other smartphone and tablet makers.


Fragile global growth kept the outlook mixed for South Korea, which early on Thursday reported its gross domestic product grew 0.9% in the January-March period from 0.3% in the previous three months. But the 2.8% year-on-year growth in the first-quarter was the slowest in 2 1/2 years, leaving analysts wondering if the economy has hit a bottom or not.


Crude oil futures were softer, with US crude down 0.1% at USD 104.01 a barrel early on Thursday. Brent rose 96 cents to settle at USD 119.00 a barrel on Wednesday.


Asian credit markets steadied with the rebound in equities, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by 2 basis points early on Thursday.

As markets warmed up to risk, German government bond yields rose on Wednesday after a long-term debt auction drew less in bids than the amount on offer, suggesting flows into safe-haven assets may have been exaggerated.

Sections
Follow us on
Available On