AFP / Hong Kong
Most Asian markets rose again on Wednesday, joining a global rally fuelled by strong earnings, while investors kept tabs on comments from the Federal Reserve as it prepares to bring an end to its vast financial support programme.
Signs of progress on US President Joe Biden’s massive spending bill provided an extra lift to sentiment, while bitcoin came within touching distance of a new record after a new financial instrument to invest in the cryptocurrency started trading in New York.
Strong profit reports from big-name firms over the past week have reinforced optimism that the corporate sector is, for now, weathering a recent slowdown in economic growth, supply chain issues and surging inflation, providing a much-needed boost to worried traders.
Johnson & Johnson, United Airlines and Netflix were the latest positives from the reporting season, adding to top Wall Street banks including JPMorgan Chase, Bank of America and Morgan Stanley last week.
Tokyo, Hong Kong, Sydney, Wellington, Bangkok and Manila all rose, though there were slight losses in Shanghai, Singapore, Taipei and Seoul.
London and Paris were flat in morning trade while Frankfurt edged up. Rising prices and the end of central bank largesse continued to cast a shadow.
Concerns about surging inflation running out of control have forced several central banks to hike interest rates already — with others to soon follow — and the prospect of an end to the era of cheap cash has caused an 18-month equity rally to stutter.
While some countries have already started the tightening cycle, all eyes are on the Fed owing to its oversized role in the global economy.
With the United States well on the recovery track, officials have signalled they will start to taper their colossal bond-buying scheme before the end of the year.
But the big questions are now over when the Fed will begin tapering and when it will hike interest rates — with some observers seeing a possible lift in borrowing costs in mid-2022. On Tuesday, board member Christopher Waller said the bank should wind down from next month, and while he thought a rate hike was “still some time off” as inflation moderates, he added that the near term would be “critical”. If price rises did not moderate by January the Fed “could bring forward rate hikes”. Another board member Michelle Bowman was also in favour of a November start and said any benefits of continuing the asset purchases were likely offset by the potential costs.
“The message from incoming Fed speak seems pretty clear,” said National Australia Bank’s Ray Attrill. “Inflation is going to have to be seen to be moderating, and quite significantly so, either side of year-end for markets — and indeed the majority of Fed members — to be convinced that late in 2022 is the absolute earliest that rates lift-off is likely to occur.”
Investors are keeping track of developments in Washington as Democrats look to pare back President Biden’s $3.5tn tax and spend package in hopes of getting it through Congress.
The lawmakers are looking to get progressives and moderates in the party to agree a new package worth about $2tn this week.
Bitcoin briefly rallied to as high as $64,475, less than $400 off its April record, as a financial instrument dedicated to the unit made its debut on the New York Stock Exchange. The Bitcoin Strategy ETF, a new exchange-traded fund linked to bitcoin futures rather than directly to the currency, rose nearly 5%.
The fund should be a more accessible vehicle for mainstream investors, and could therefore boost trading in the cryptocurrency.
In Tokyo, the Nikkei 225 closed up 0.1% to 29,255.55 points; Hong Kong — Hang Seng Index ended up 1.4% to 26,136.02 points and Shanghai Composite closed down 0.2% to 3,587.00 points yesterday.
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