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Asian Stocks Up, Investors Digest Further Fed Comments on Asset Tapering

Stock MarketsJun 23, 2021 10:41PM ET
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By Gina Lee – Asia Pacific stocks were mostly up Thursday morning, with investors continuing to digest the most recent comments from U.S. Federal Reserve officials on asset tapering.

Japan’s Nikkei 225 edged up 0.15% by 10:25 PM ET (2:25 AM GMT) and South Korea’s KOSPI was up 0.27%.

In Australia, the ASX 200 inched down 0.09%, with the country dealing with its latest, growing COVID-19 outbreak in Sydney.

Hong Kong’sHang Seng Index jumped 1.96%.

China’s Shanghai Composite inched up 0.01% while the Shenzhen Component rose 1%. U.S.-China relations are back in the spotlight, however, with the U.S. reportedly planning to bar some solar products made in Xinjiang province.

Dallas Fed President Robert Kaplan, who previously predicted an interest rate hike in 2022, said that the economy will likely meet the Fed’s threshold for tapering earlier. However, Atlanta Fed President Raphael Bostic said the central bank could slow down the process over the next few months. Neither Kaplan nor Bostic are currently voting members of the Federal Open Market Committee that directs monetary policy.

Fed officials have recently scrambled to reassure markets after its latest policy decision, handed down during the previous week, took a hawkish turn. Recent commentary, including from Fed Chairman Jerome Powell, stressed that a loose monetary policy would remain in place, but indicated that a gradual withdrawal of emergency support could happen in the months ahead.

Officials have also indicated that any action is dependent on inflation and employment goals being met. This has triggered a debate among investors on the outlook, with a particular focus on bets tied to accelerating growth.

“You’ve got this inflation issue that has captured the imagination of investors for the first time in a long time,” CIBC Private Wealth Management chief investment officer David Donabedian told Bloomberg. He added that he does not “have a great case for why the market takes another leap forward here over the summer.”

The Fed will also release the results of its latest bank stress tests, and the Bank of England will hand down its policy decision, later in the day.

On the data front, June’s manufacturing purchasing managers’ index (PMI) was a better-than-expected 62.6, the fastest pace since 2007 according to records. The services PMI, however, was lower than expected at 64.8.

Further data, including core durable goods orders for May, the GDP for the first quarter and initial jobless claims for the week, are due to be released later in the day. Data on personal spending and the University of Michigan consumer sentiment will follow a day later.

Meanwhile, U.S. Treasury Secretary Janet Yellen warned on Wednesday that the Treasury could exhaust emergency measures in order to avoid breaching the U.S. debt limit as soon as August 2021. She urged the U.S. Congress to take action to prevent a “catastrophic” potential default.

Asian Stocks Up, Investors Digest Further Fed Comments on Asset Tapering

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