TOKYO – Asian stocks were mostly higher on Monday, with investors interpreting the US Federal Reserve chief’s comments as signaling that low interest rates are here to stay for some time.
Japan’s benchmark Nikkei 225 edged up 0.2% in morning trading to 27,686.18. The Australian S & P / ASX 200 rose nearly 0.1% to 7,494.10. South Korea’s Kospi was virtually unchanged at 3,133.72. The Hong Kong Hang Seng was down 0.3% to 25,344.79, while the Shanghai Composite came in at 3,535.19, up 0.4%.
Regional investors are also eagerly awaiting data expected Tuesday on the Chinese manufacturing sector.
The rally in Asia paralleled the rally that ended the week before on Wall Street, when the S&P 500 rose 39.37, or 0.9%, to 4,509.37 to break its previous record high of Wednesday. The Dow Jones Industrial Average climbed 242.68 points, or 0.7%, to 34,455.80, and the Nasdaq composite gained 183.69, or 1.2%, to 15,129.50.
The speech by Fed Chairman Jerome Powell was critical, as US stocks have broken record after record this year, in large part thanks to the Fed’s massive efforts to support the economy and financial markets. Gains had become increasingly timid as markets began to consider a possible end of Fed aid.
Last week, Powell noted past mistakes where policymakers took premature action in the face of seemingly high inflation. He clarified that a slowdown in Fed bond purchases does not mean a short-term rate hike is imminent. This would require the labor market and inflation to prevent “significantly stricter” testing.
“We have a long way to go to achieve maximum jobs,” said Powell.
Shares of US companies whose earnings are most closely tied to the economy made the largest gains after the speech.
One issue noted by Powell was the delta variant of the coronavirus, which remains of global concern. The delta variant is behind the recent increase in COVID-19 infections in Asia, where vaccine deployment has been slower than in parts of the United States and Europe.
“With the spread of the delta variant still widespread and the slow pace of the vaccination campaign, Singapore being the exception, the exit from the pandemic is unpredictable, fraught with periodic setbacks and blockages,” said Venkateswaran Lavanya of Mizuho Bank. in Singapore.
The delta variant has already slowed down some economic activity. In the USA. a report released on Friday showed consumer spending in the country rose 0.3% in July from June, a sharp slowdown from the 1.1% jump the month before. This is a big deal when consumer spending is the driving force behind the US economy and its growth has slowed even though income growth for Americans accelerated to 1.1% last month.
In energy trading, benchmark US crude fell 10 cents to US $ 68.64 per barrel. Brent crude, the international standard, added 10 cents to $ 72.80 a barrel.
In currency trading, the US dollar edged down to 109.74 Japanese yen from 109.84 yen. The euro cost $ 1.1806, compared to $ 1.1792.
AP Business Writer Stan Choe contributed.