The Federal Reserve moved away from raising U.S. interest rates, helping Asian shares rally. The latest minutes from the Federal Reserve’s Federal Open Market Committee (FOMC) have revealed the cautious approach that the central bank is adopting. Many policymakers have discussed the importance of understanding how a global slowdown would affect the U.S. economy prior to raising interest rates for the first time in a decade.
Some of the proponents of an interest rate hike this year have called upon their peers to view last month’s slowdown in job creation in the context of an economy that is nearing full employment. However, when considering all of the positions put forth by Fed officials, it is likely that an interest rate hike won’t be seen until March of next year.
Asian markets rose early on Friday as they follow Wall Street’s lead as well as a jump in oil prices. The likely delay of the Fed’s interest rate hike has also boosted the appeal of riskier investments, helping stocks post gains. MSCI's broadest index of Asia-Pacific shares outside Japan (NYSE:EPP) rose 1.8% as it remains on track for a 6.8% weekly gain. Chinese indexes extended Thursday’s gains as the blue-chip CSI300 index added 1.2% and Shanghai Composite Index was up 1.1%. Chinese gains will likely continue as Beijing introduces more stimulus measures aimed maintaining the country’s economic growth. The Japanese Nikkei added 1.6%, bringing the benchmark to a 4% weekly gain.
U.S. markets ended higher on Thursday following the release of the minutes from the Federal Reserve’s latest policy meeting. However, early day trading wasn’t nearly as positive. Investors were concerned as they awaited more details on why the Fed decided not to raise interest rates last month. Although nothing surprising was mentioned in the minutes, the fact that a U.S. central bank is so concerned over global economic growth as well as the U.S. economy’s ability to thrive within that ecosystem has investors on edge.
The Dow Jones industrial Average extended its gains for the fifth straight session, posting its longest winning streak this year. The index added 138.46 points, or 0.8%, to trade at 17,050.75 as it broke through the 17K psychological resistance level. Caterpillar Inc. (NYSE:CAT) was one of the best-performing components with a 2.3% gain. The Standard and Poor’s 500 Index rose 17.6 points, or 0.9%, to trade at 2,013.43 as it ended the session above its 50-day moving average. The NASDAQ Composite gained 19.64 points, or 0.4%, to trade at 4,810.79 as the benchmark rebounded from a rout in the biotech sector earlier in the session.
Next week’s major economic data release begin on Tuesday with the release of the Chinese balance of trade followed by the UK year-over-year inflation rate and the German economic sentiment index. The Chinese year-over-year inflation rate will be released on Wednesday followed by UK unemployment and U.S. retail sales. U.S. core inflation rate will be released on Thursday.