Fed shift helps global stocks close in the best month since 2016

An abrupt U-turn of the Federal Reserve on the prospect of further interest rate hikes has contributed to global equities on the right track for its best month of nearly three years.

Asian stocks liked the sharpest gains on Thursday, echoing a more than 1.5 percent jump on Wall Street yesterday after politicians said they would be patient in assessing the outlook for monetary policy, and being open to changing speed where the central bank's thousands of dollar dollar holdings of US government bonds were wound up.

The shift was enough to convince investors that the Fed, which in December was projecting two more courses, is rising this year, and has been working cautiously to relax the quantitative eaisng policies that injected trillions of dollars into the US economy After the financial crisis, is prepared to extend a decade-long attitude to simple money.

"We are actually quite encouraged by this new tone in the Fed language, as we had argued for the advice bad of a break to consider hiking already before 201[ads1]8's horrible fourth quarter for markets," said Rick Reider, head of interest on Blackrock.

The change from the Fed helped cement a fantastic rally for global stocks in January, with a sharp reversal of December near stock market decline. FTSE All World, a broad benchmark for world equities, has climbed 7.2 percent in January, and its best month since March 2016. Tumbling almost 10 percent in December, S & P 500 has increased 7 percent in The best month since October 2015.

The Fed cited lower growth in major markets, including China, and increased geopolitical uncertainty, including trade tensions and Brexit, for the dramatic shift that came as a relief to them – including President Donald Trump – Who Had The grip Mr Powell has been too bullish on the outlook.

Michael Feroli, American economist at JPMorgan Chase, said he couldn't remember such a big change in the direction of the Fed absent a major shift in economic background. Harm Bandholz, chief American economist for UniCredit, said changes in the Fed's monetary policy statement gave traders and investors everything they could have hoped for.

Jumps in stock markets in Asia stood out on Thursday, with Japan's Topix and Hong Kong's Hang Seng index, both up by about 1 percent. Mainland China's CSI 300 also shot up by over 1 percent. Currently ebbed in Europe, with Frankfurt's Xetra Dax 30 back to the flat line, not holding an opening gain of 0.7 percent. The regional Stoxx 600 was also flat.

The outlook for an earlier end to Fed's monetary measures gave a rally in government bonds, with returns on two-year Treasuries falling below 2.5 percent for the first time in three weeks. The return on the 10-year Treasury went to 2.67 per cent.

Meanwhile, the dollar weakened across the board, with the renminbi affecting a six-month high. Renminbi on land increased by 0.2 percent, enough to pick up its strongest calendar month a year, up 2.5 percent against US dollars in January.

On Wall Street, futures point to a 0.1 percent increase for S & P 500 on Thursday.

Tai Hui, Marketing Director of Asia Pacific at JPMorgan Asset Management, said the Fed's statement to keep the prices on hold "Removed one of two obstacles to Asian and new market risk permissions to move higher."

The remaining obstacle is the trade tension between China and the United States, which he described as "much more challenging". The Fed's announcement should also ease concerns about rising funding costs for emerging market companies that have borrowed in US dollars, he added.

The focus is now on trade negotiations between the United States and China. Donald Trump will meet Liu He, China's Foreign Minister, at the end of the high-level talks this week, to increase pressure on Beijing to make concessions on economic reforms, which could end the wage war.

Analysts at ING said US dealers increasingly insisted on fundamental changes in China's industrial "Made in China 2025" policy, as well as more transparent currency trading and the value of the yuan.

Mr Trump earlier this year took to Twitter to criticize "China, the EU and others [for] manipulating their currencies and interest rates lower".

Source link