Asia lingers as S&P futures hit a new peak

SYDNEY (Reuters) – Asian stock markets lagged Thursday as US stock futures plunged to new all-time highs after the Federal Reserve underscored its commitment to keeping policies super flexible even as the economy is recovering rapidly.

FILE PHOTO: People wearing protective masks, after the coronavirus disease (COVID-19) outbreak, are reflected on a stock quote screen outside a brokerage in Tokyo, Japan on Aug. 31, 2020. REUTERS / Kim Kyung-Hoon

MSCI’s widest index of Asia-Pacific stocks outside Japan was flat with little change during the week. The Japanese Nikkei eased 0.3% and Chinese blue chips 0.1%, while trading was very subdued.

The outperformance of the US economy helped S&P 500 futures add 0.3% to a new peak, while Nasdaq futures gained 0.4%. EUROSTOXX 50 futures strengthened 0.2% and FTSE futures 0.3%.

Minutes of the latest Federal Reserve policy meeting revealed that members felt the economy was still far behind target and were in no hurry to scale back their $ 120 billion a month bond purchases.

Fed Chairman Jerome Powell speaking at an IMF event later on Thursday and is likely to reiterate the moderate outlook.

“This discussion is in line with our view that it will be later this year before the Fed starts talking about tapering, with actual changes in the pace of purchase only occurring in the first quarter of 2022,” said JPMorgan analysts.

“Fed officials generally viewed the recent rise in longer-term government bond yields as a reflection of an improving outlook and some strengthening of inflation expectations, and not a risk to the outlook.”

10-year government bond yields have since fallen slightly to 1.667% from the recent 14-month high of 1.776%, but are struggling to break below 1.59%.

The pullback coincided with a dip in the dollar index to 92,444, from its recent five-month high of 93,439. The dollar was also at 109.78 yen, after clearing its recent one-year peak at 110.96.

The euro was stable at $ 1.1868, after hitting an overnight high of $ 1.1914 following a surprisingly optimistic survey of the European Union’s business activities.

“Improved virus and growth expectations have boosted consumer and business confidence, driving both domestic and global demand for manufactured products,” Barclays analysts said in a note.

“This phenomenon is widely supported in European economies.”

In the commodity markets, gold remained stationary at $ 1,736 an ounce after encountering resistance around $ 1,745.

Oil prices fell, but were still within a narrow trading range that held up for the past two weeks or so. [O/R]

Brent fell 38 cents to $ 62.78 a barrel, while US crude oil lost 40 cents to $ 59.36 a barrel.

Additional reporting by Chibuike Oguh; Editing by Ana Nicolaci da Costa