Asia shares climb on hopes of accommodative Fed policy
SYDNEY (Reuters) — Asian shares pulled ahead on Monday while bonds were in demand globally on mounting speculation the US Federal Reserve will sound decidedly dovish at its policy meeting this week.
Japan’s Nikkei advanced 0.59 percent, and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent.
Shanghai blue chips climbed 1.6 percent and spread betters pointed to modest opening gains for the major European bourses. One focus will be shares in Deutsche Bank and Commerzbank after the banks confirmed they were in merger talks.
E-Mini futures for the S&P 500 dithered either side of flat. The S&P 500 boasted its best weekly gain since the end of November last week, while the Nasdaq had its best week so far this year.
There is much talk Fed policymakers will lower their interest rate forecasts, or “dot plots,” to show little or no further tightening this year.
Also expected is more detail on a plan to stop cutting the Fed’s holdings of nearly $3.8 trillion in bonds. The twoday meeting ends with a news conference on Wednesday.
As a result, yields on three and five-year Treasuries are dead in line with the effective Fed funds rate, while futures imply a better-than-even chance of a rate cut by year end.
“Long-term bond yields remain noticeably lower across a wide range of countries,” said Alan Oster, group chief economist at National Australia Bank.
“Markets are pricing in little or no chance of a rate hike by the major central banks this year, outside of the Bank of England. The Fed is indicating that it will be patient and we don’t expect any rate hikes this year.”
Data on Friday showed US manufacturing output fell for a second straight month in February and factory activity in New York state hit nearly a two-year low this month, further evidence of a sharp slowdown in economic growth early in the first quarter.