TOKYO: Asian shares rose on Thursday as investors were encouraged by President Donald Trump’s less combative tone in his first speech to Congress, which sent Wall Street stocks sharply higher, while growing bets on a US rate hike this month buoyed the dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7 per cent, led by rebounds in Australian and Hong Kong shares . Japan’s Nikkei rose 1.3 per cent to a 14-month high.
MSCI’s broadest gauge of the world’s stocks covering 46 countries rose nearly 1 per cent on Wednesday to a record high, posting its biggest daily gain in almost three months. On Wall Street, the Dow Jones Industrial Average blasted through the 21,000-point mark for the first time. Both the Dow and the S&P 500 rallied around 1.4 per cent.
Trump pledged to deliver “massive” tax relief to the middle class and corporate tax cuts, to spend heavily on infrastructure and to ease regulations — steps that have helped to push US stocks higher since his election victory in November.
While Trump gave few new details on his tax or spending plans, investors were encouraged by what they saw as a less confrontational tone as he tries to push his growth agenda through a Congress reluctant to widen the government’s budget deficit.
More to the point, his stimulus plan comes as the global economy is picking up momentum.
The J.P. Morgan Global manufacturing PMI hit its highest levels in nearly six years in February.
“Trumpflation may be a misnomer. The uptick in manufacturing predates the election. It continued in February,” ING said in a note, pointing to generally strong factory activity readings around the world last month.
“It’s better to be lucky than good. We think President Trump may be lucky in holding office when the overhang of debt and fear from the Global Financial Crisis lifts.”
A rate hike by the Federal Reserve later this month also would signal policymakers’ growing confidence in US and global economic expansion.
The S&P financial index soared 2.84 per cent after a few key Federal Reserve officials including New York Fed President William Dudley and San Francisco Fed President John Williams, hinted at an interest rate hike this month.
Usually-dovish Fed Governor Lael Brainard also joined the chorus, saying an improving global economy and a solid US recovery mean it will be “appropriate soon” for the Fed to raise rates.
US Treasuries yield jumped, with the two-year yield rising to as high as 1.308 per cent, its highest since August 2009. It last stood at 1.296 per cent.
The 10-year yield rose to 2.462 per cent, still below its two-year peak of 2.641 per cent marked in December.
Fed Funds rate futures are now pricing in about an 80 per cent chance that the Fed will bump up interest rates by 0.25 per centage point at its policy meeting on March 14-15, compared to around 30 per cent at the start of this week.
More Fed policy-setters, including Chair Janet Yellen and Vice Chair Stanley Fischer, will speak on Friday, likely providing further signals on the Fed’s policy path.
In the currency market, the dollar benefited from rising expectations of a Fed rate hike.
The dollar’s index against a basket of six major rivals rose to its highest level in seven weeks.
The US currency rose 0.2 per cent to 114.02 yen, while the euro dipped 0.2 per cent to $1.0529.
The British pound sank to a six-week low of $1.2261 as disappointing UK economic data added to political nerves that have begun to weigh on the currency again after last year’s Brexit vote. — Reuters
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