Wednesday, December 18, 2013

Asian Stocks Rise After Fed Begins Tapering U.S. Stimulus

Asian stocks rose after the Federal Reserve expressed enough confidence in the U.S. labor market to taper asset purchases while still promising to hold interest rates close to zero.
Fast Retailing Co., Asia’s biggest apparel chain, climbed 3.5 percent, pushing Japan’s Nikkei 225 Stock Average toward the highest closing level since 2007 as the yen touched a five year-low against the dollar. Fanuc Corp. (6954), a Japanese maker of factory robots, rose 4 percent to be headed for the highest close on record. Caltex Australia Ltd. surged 11 percent as the petroleum refiner said profit may climb to A$340 million ($300 million).
The MSCI Asia Pacific Index advanced 0.2 percent to 138.56 as of 12:01 p.m. in Tokyo, with more than two stocks rising for each that fell. The Fed announced plans to cut its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the unprecedented stimulus put in place by outgoing Chairman Ben S. Bernanke to help the economy recover from the worst recession since the 1930s.
“It’s a win win for markets,” Shane Oliver, who helps oversee $131 billion as head of investment strategy at AMP Capital Investors Ltd. in Sydney, said by phone. “They are more optimistic on the employment rate and the economy while still keeping loose monetary policy in place with low rates to support the economy. We’re happy to stay overweight equities and if anything buy a bit more.”

Regional Gauges

Japan’s Topix index rose 0.9 percent and the Nikkei 225 climbed 1.6 percent as the yen touched the lowest intraday level since October 2008. It traded at 103.99 per dollar as of 12:11 p.m. in Tokyo.
Australia’s S&P/ASX 200 Index (AS51) jumped 1.6 percent. Trading volume was 50 percent higher than the 30-day intraday average as equity index and single stock options contracts expired. New Zealand’s NZX 50 Index gained 0.7 percent after a report showed economic growth accelerated to the fastest pace in almost four years in the third quarter. South Korea’s Kospi index increased 0.1 percent.
Hong Kong’s Hang Seng Index added 0.2 percent, paring gains of as much as 1.1 percent. The Hang Seng China Enterprises Index of mainland shares traded in the city lost 0.2 percent, reversing earlier gains. The Shanghai Composite Index was little changed. China’s interest-rate swaps jumped the most since July, touching a record, as the central bank refrained from injecting cash into the financial system.
Fu Shou Yuan International Group Ltd., a death-care provider, jumped 50 percent in Hong Kong in its trading debut.
Taiwan’s Taiex index added 0.4 percent and Singapore’s Straits Time Index increased 0.1 percent.
The Fed said its benchmark interest rate is likely to stay low “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below” the Fed’s 2 percent goal.

Bernanke Comments

“Reflecting cumulative progress and an improved outlook for the job market, the committee decided today to modestly reduce the monthly pace at which it is adding to the longer-term securities on its balance sheet,” Bernanke told reporters in Washington yesterday after concluding a two-day policy meeting of the Federal Open Market Committee.
The U.S. Senate yesterday cleared and sent to President Barack Obama a $1.01 trillion budget deal, lowering the U.S. deficit over 10 years and easing $63 billion in automatic spending cuts. The plan keeps in place about half of the reductions known as sequestration for next year, and about three-quarters of the planned cuts for 2015.
The MSCI Asia Pacific Index gained 6.9 percent this year through yesterday as central-bank stimulus shored up global economic growth. The gauge yesterday traded at 13.7 times estimated earnings, compared with 16.3 for the Standard & Poor’s 500 Index and 14.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Best Performer

The Topix rose 45 percent this year through yesterday, the most among 24 major developed markets tracked by Bloomberg, amid unprecedented stimulus by the Bank of Japan in support of Prime Minister Shinzo Abe’s efforts to end 15 years of deflation. The yen slumped 15 percent this year, the most among G-10 nation currencies tracked by Bloomberg.
Futures on the S&P 500 Index dropped 0.2 percent today after the equities gauge surged 1.7 percent to a record 1,810.65 yesterday. The Dow Jones Industrial Average soared 1.8 percent to 16,167.97, also a record. The cost of protecting against equity losses as measured by the Chicago Board Options Exchange Volatility Index slid 15 percent, the biggest drop in two months.