Asian Stocks Rebound from U.S. Rate Hike Shock
Asian stock markets rose sharply Monday, recovering from a tumble last week when the U.S. central bank decided to pull back one of its emergency supports for the financial system.
The region’s major indexes were up as much as 3 percent as investors took a second look at the Federal Reserve’s decision and decided it boded well for the U.S. economy. Asian investors were initially unnerved by the unexpected move Thursday to raise rates on emergency bank lending, fearing it could derail recovery in the world’s largest economy.
Monday’s change in sentiment was helped by a tame U.S. inflation report that showed consumer prices excluding food and energy fell last month for the first time since 1982. The news reassured traders the Fed, while bumping some bank rates higher, would keep holding down borrowing costs for consumers to help resuscitate the economy.
“If the Fed’s increasing the lending rate back to normal, that economy must be performing better — at least that’s how investors are interpreting it right now,” said Peter Lai, investment manager at DBS Vickers in Hong Kong.
“It’s a good sign, but not that good,” he said, pointing to indications of sluggish American economic growth and lofty debt levels in European countries that have weighed on world markets in recent weeks.
Japan’s Nikkei 225 stock index jumped 320.01 points, or 3.2 percent, to 10,443.59, and Hong Kong’s main index climbed 471.41, or 2.4 percent, to 20,365.43.
Elsewhere, South Korea’s market rose 2.2 percent, Taiwan’s stock measure was up 2 percent while China’s Shanghai index retreated 0.4 percent.
Markets in China and Taiwan were closed all last week for Lunar New Year holidays.
Friday on Wall Street, the Dow rose 9.45, or 0.1 percent, to 10,402.35, its highest finish in a month. The Dow is now down only 0.25 percent for the year.
The broader Standard & Poor’s 500 index rose 2.42, or 0.2 percent, to 1,109.17, while the Nasdaq composite index rose 2.16, or 0.1 percent, to 2,243.87.
Oil prices were higher in Asia, with benchmark contract rising 63 cents, or 0.8 percent, to $80.44.
In currencies, the dollar rose to 91.62 yen from 91.48 yen. The euro climbed to $1.3648 from $1.3633.
2/21/2010 10:09 PM HONG KONG