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Asian Stocks Down, Investors Digest Fed’s Continuous Dovish Stance

Stock MarketsApr 08, 2021 11:17PM ET
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By Gina Lee – Asia Pacific stocks were mostly down Friday morning, but hovering near record levels, as investors continued to assess the U.S. Federal Reserve’s assurance that economic reinvigoration can be achieved without stoking runaway inflation.

China’s Shanghai Composite was down 0.72% by 11:11 PM ET (3:11 AM GMT) and the Shenzhen Component slid 1.06%. Consumer and producer price indexes data for March released earlier in the day was better than expected, with the CPI contracting 0.5% month-on-month and growing 0.4% year-on-year while the PPI grew 4.4% year-on-year.

Hong Kong’s Hang Seng Index fell 0.84%.

Japan’s Nikkei 225 was up 0.29%, while South Korea’s KOSPI was down 0.32% and in Australia, the ASX 200 was down 0.24%.

Fed Chairman Jerome Powell signaled during an International Monetary Fund event on Thursday that the central bank is nowhere near reducing its support for the U.S. economy. He also said that although the economic reopening could result in a momentary surge in prices, it will be temporary and not constitute inflation.

Although the comments demonstrated the Fed’s commitment to dovish policy for now, Powell added that the Fed would react should inflation expectations start “moving persistently and materially” above tolerable levels.

Meanwhile, Treasuries got a boost, with the benchmark 10-year yield trading around a two-week low. Comments from Powell’s colleague, New York Fed Executive Vice President Lorie Logan, also sparked talk of increased Fed purchases in Treasury 20-year bonds which then went on to outperform.

Disappointing jobless claims data released on Thursday indicated that the economic recovery from COVID-19 is far from complete, however. The data said that the number of claims unexpectedly rose to 744,000, more than the 680,000 claims in forecasts prepared by and the 728,000 claims filed during the previous week.

“Jobless claims set a tone for the market that perhaps things are not as strong as people think and we’re still ways away from a recovery,” Inverness Counsel chief investment strategist Tim Ghriskey told Reuters.

Other investors struck a more optimistic tone.

“A lot of investors are worried about the stock market highs, but that doesn’t mean it can’t get higher, and the economic conditions are certainly set up for a positive equity environment,” UBS Global Wealth Management managing director Xi Qiao told Bloomberg.

On the COVID-19 front, more than 726 million COIVD-19 shots have been administered globally as of Apr. 9. However, several countries including China are facing supply shortages as they vaccinate their populations.

The U.S. outlook is greatly improved but remains at risk from potential setbacks in the global economy as the vaccine rollout “hasn’t been nearly as robust in many countries,” San Francisco Fed president Mary Daly told Bloomberg.

Asian Stocks Down, Investors Digest Fed’s Continuous Dovish Stance

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