Asia Pacific stocks were mostly up Wednesday morning, with reassuring comments from U.S. Federal Reserve officials on inflation and monetary policy starting to calm investors’ frayed nerves.
Japan’s Nikkei 225 edged up 0.16% by 10:11 PM ET (2:11 AM GMT), with the Bank of Japan released the minutes from its own monetary policy meeting earlier in the day. The country also released its manufacturing and services purchasing managers’ index for June earlier in the day, with the former standing at a lower-than-expected 51.5.
South Korea’s KOSPI was up 0.28% while in Australia, the ASX 200 was down 0.41%.
Hong Kong’s Hang Seng Index gained 0.78%.
China’s Shanghai Composite inched down 0.02% while the Shenzhen Component was up 0.38%.
The benchmark S&P 500 climbed for a second day as Fed Chairman Jerome Powell insisted that the recent larger-than-expected inflation pressures are transitory.
The dollar and U.S. Treasury yields held declines, while bitcoin rebounded from its fall below the $30,000 mark.
Markets are finally starting to stabilize after the Fed’s sudden hawkish tone in its latest policy decision surprised investors. With the decision hinting at earlier than-expected asset tapering and interest rate hikes, officials have since sought to reassure continuing Fed support for the economy via asset purchases and low interest rates.
The Fed’s shift during the previous week to acknowledge higher inflation and pull forward its rate hike projections is “a reflection of more positive longer-term dynamics,” BlackRock Investment Institute analysts led by Jean Boivin said in a report.
“We believe the Fed’s new outlook will not translate into significantly higher policy rates any time soon. This, combined with the powerful restart, underpins our pro-risk stance,” the report added.
In his testimony to the House of Representatives Select Subcommittee on Tuesday, Powell said that recent price increases were bigger than expected but insisted that they will likely wane. He also acknowledged the uncertainty on this view and said the central bank would be patient in increasing borrowing costs.
Ahead of Powell’s testimony, New York Fed President John Williams said that a discussion about raising interest rates is still “way off in the future.” Meanwhile, Cleveland Fed President Loretta Mester said additional employment gains for the next several months are her pre-requisite to assessing whether the U.S. economy has achieved the progress required to begin asset tapering. More Fed officials will also deliver comments throughout the week.
The Fed will also release the results of its bank stress tests on Thursday, with the Bank of England handing down its policy decision earlier in the day.
On the data front, U.S. new home sales for May and the current account balance for the first quarter will be released later in the day.