Asia shares at highest in nearly a decade, dollar skids on Fed

SYDNEY: Stocks, bonds and commodities were all on a roll yesterday as bulls scented a softening in the Federal Reserve’s confidence on inflation that promised to keep US interest rates low for longer.

MSCI’s broadest index of AsiaPacific shares outside Japan climbed 1 per cent to heights not seen since December 2007. It has gained over 5 per cent so far this month.

E-Mini futures for the S&P 500 were up 0.2 per cent, while Eurostoxx 50 futures started steady.

Japan’s Nikkei rose 0.15 per cent, while stocks in the Philippines touched a one-year peak.

China’s blue-chip CSI300 index recouped early losses to edge up 0.3 per cent as data showed a pick up in profit growth for industrial firms.

The latest rush for risk came after the Fed left US rates unmoved as expected but tweaked its wording on inflation.

The market seized on the fact that the central bank noted that both overall and core inflation had declined and removed the qualifier ‘recently,’ perhaps suggesting concerns the slowdown might not be temporary.

The Fed also said it expected to start winding down its massive holdings of bonds “relatively soon,” cementing expectations of a September start.

While that would be an effective tightening in financial conditions it might also lessen the need for actual hikes in rates, which matter more for currency valuations. — Reuters