SYDNEY (Reuters) – Asian stocks rested at record highs on Thursday as investors digested recent meaty gains, while bulls were bolstered by the promise of endless free money after a favorable reading of US inflation and a subdued Federal Reserve outlook.
Contributing to the anesthetic was a lack of liquidity as the markets in China, Japan, South Korea and Taiwan were all on vacation.
MSCI’s widest index of Asia-Pacific stocks outside Japan added 0.1%, after climbing four sessions and up more than 10% so far this year.
Japan’s Nikkei was closed after finishing at a 30-year high on Wednesday, while Australia’s main index was close to an 11-month high.
With China out, there has been little reaction to news that the Biden administration will consider adding “new targeted restrictions” to certain sensitive technology exports to the Asian giant and maintain tariffs for the time being.
Futures for the S&P 500 and NASDAQ were both stable, hitting historic highs on Wednesday. EUROSTOXX 50 futures and FTSE futures barely moved.
Still, the outlook for more global stimulus measures overnight got a hefty boost from a surprisingly soft reading of US core inflation, which declined to 1.4% in January.
Jerome Powell, chairman of the Federal Reserve, said he wanted to see inflation rise to 2% or more before even thinking about phasing out the bank’s super simple policies.
In particular, Powell stressed that once the pandemic effects had subsided, the unemployment rate was closer to 10% than the reported 6.3% and thus far from full employment.
As a result, Powell called for a “social commitment” to reduce unemployment, which analysts say was strong support for President Joe Biden’s $ 1.9 trillion stimulus package.
Westpac economist Elliot Clarke estimated that more than $ 5 trillion in cumulative stimulus packages, worth 23% of GDP, would be needed to repair the damage caused by the pandemic.
“Historical experience provides strong justification for acting against unwanted inflationary pressures once seen, after full employment has been achieved,” he said.
“To that end, financial conditions are expected to continue to provide strong support to the US economy and global financial markets in 2021 and likely through 2022.”
The mix of bottomless Fed funds and a tame inflation report was an ointment against the pains in the bond market, bringing the 10-year yield to 1.12% from a high of 1.20% at the start of the week.
That, in turn, weighed on the US dollar, which fell to 90,395 on a basket of currencies and away from a 10-week high of 91,600 hit late last week.
The dollar fell to 104.57 yen from a recent high of 105.76, while the euro rose to $ 1.2122 from its low of $ 1.1950.
In the commodity markets, gold was sidelined at $ 1,838 an ounce as investors pushed platinum to a six-year peak on bets on increased automotive demand. [GOL/]
Oil prices took a breather after the longest extraction streak in two years amid producer supply and the hope that vaccine rollouts will spur a recovery in demand. [O/R]
“Current price levels are healthier than the current market and entirely dependent on supply constraints as demand has yet to recover,” warned Rystad Energy’s Bjornar Tonhaugen.
Brent futures fell 40 cents to $ 61.07, while US crude oil fell 36 cents to $ 58.32 a barrel.
Additional reporting by David Henry in New York; Editing by Lincoln Feast and Sam Holmes