Asian shares jump, dollar eases after Powell comments

Asian stocks jumped on Thursday while the dollar eased after Federal Reserve Chairman Jerome Powell said a “disinflationary” process was under way, boosting risk appetite and hope that the US central bank will soon end its monetary tightening streak.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.84 per cent higher, while Japan’s Nikkei rose 0.37 per cent. Australia’s S&P/ASX 200 index added 0.37 per cent.

Chinese stocks were 0.11 per cent higher, while Hong Kong’s Hang Seng Index was up nearly 1.0 per cent.

The US central bank announced an expected 25 basis points interest rate increase after a year of larger hikes and said it had turned a key corner in the fight against a high inflation rate. But policymakers projected “ongoing increases” in borrowing costs would still be needed.

Still, the market took a dovish cue from comments from Powell’s news conference. That helped the S&P 500 and the Nasdaq close sharply higher overnight.

Ali Hassan, portfolio manager & managing director at Thornburg Investment Management, said Powell was seemingly shrugging off easier financial conditions as a concern in his news conference.

“This was a greenlight that the market could buy without feeling that they are fighting the Fed.”

The focus will now switch to European Central Bank (ECB) and Bank of England (BOE) meetings scheduled for Thursday and the interest rate path the two central banks are likely to take.

Saxo Markets strategists said the ECB has surpassed its peers in the hawkishness quotient recently, and will likely repeat that this week.

The BOE will likely be the trickiest given indecisive market pricing as well as the scope for a split vote, they said.

In the currency market, the dollar spiked lower following Powell’s remarks, with the US dollar index, which measures the currency against six major peers, falling to a fresh nine-month low of 100.80. It was last at 100.98.

The euro was up 0.2 per cent to $US1.1011 ($A1.5440). The yen strengthened 0.22 per cent to 128.65 per dollar, while sterling was last trading at $US1.2372 ($A1.7349), down 0.03 per cent on the day.

The yield on 10-year US Treasury notes was up 1.5 basis point to 3.413 per cent, while the yield on the 30-year Treasury bond was up 1.3 basis point to 3.563 per cent.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 0.2 basis point at 4.108 per cent.

Spot gold added 0.2 per cent to $US1,953.69 ($A2,739.62) an ounce, having touched nine-month high of $US1,957 ($A2,744) per ounce earlier.

US crude rose 0.93 per cent to $US77.12 ($A108.14) per barrel and Brent was at $US83.48 ($A117.06), up 0.77 per cent on the day.