Asia witnesses post Fed rally

Regional benchmarks record steady to impressive gains, dollar slips

Asian stocks managed to garner steady to impressive gains as the strong overnight cues from the US markets, higher commodity prices and a continued wave of risk appetite in assisted the global markets. The BOJ eased its monetary conditions further while World Bank revised up its 2010 economic growth outlook for China aiding to gains in the regional benchmarks.

US stocks clocked solid gains on Tuesday as traders digested the Federal Reserve's decision to once again leave rates near their historic lows. The Dow ended the session at a nearly two-month closing high, while the Nasdaq and the S&P 500 both reached their best closing levels in well over a year.

With strong overnight cues, the Asian markets surged right from the start. Japanese stocks rose to an eight-week high, as the BOJ eased monetary conditions. The BOJ, which left its policy rate at 0.1%, said it would lend another Y10 trillion in 3-month funds at the 0.1% fixed rate to banks, on top of its current Y10 trillion. The move was widely expected, as the BOJ has been under steady political pressure in recent months to help fight deflation. The benchmark Nikkei 225 closed at 10,847, up 125 points or 1.17% and the broader Topix index of all Tokyo Stock Exchange First Section issues rose 9 points or 1% to 947.

South Korea's KOSPI finished at 1,683, up 35 points or 2.11%. South Korea's seasonally adjusted jobless rate fell to 4.4% in February from January's ten-year high of 4.8%, the National Statistical Office said Wednesday. The unadjusted rate of unemployment stood at 4.9%, down from 5% in the previous month.

The Australian market ended sharply higher, as higher commodity prices lifted resources stocks and a surge in new home starts in the December quarter boosted sentiment. The Australian Bureau of Statistics said today that construction starts for new homes in Australia increased a seasonally adjusted 15.1% in the December quarter compared to the September quarter, the biggest quarterly increase since 2001. Compared to a year ago, dwelling starts were up 26% in the December quarter. While the benchmark S&P/ASX 200 rose 56 points or 1.17% to 4,853, the broader All Ordinaries index ended at 4,867, up 58 points or 1.20%.

The World Bank on Wednesday revised up its 2010 economic growth outlook for China and said the country may need to tighten its monetary policy eventually to address risks of asset price bubbles. In its latest China quarterly update, the bank revised up its growth projection for this year to 9.5% from 8.7% in its East Asia and Pacific update released in November and 9% expansion predicted in January's global economic outlook. China's benchmark Shanghai Composite Index, which covers both A and B shares, also closed up 58 points or 1.93% at 3,050, led by miners.


In Mumbai, the key benchmark indices cut gains in the later half of day's trade after hitting their highest level in nearly two months earlier in the day. The BSE 30-share Sensex was provisionally up 106.39 points or 0.61%, off close to 90 points from the day's high. Metal and capital goods stocks rose while realty stocks fell.

However, the New Zealand markets dropped. The benchmark NZX50 closed in red for a second straight day, as heavyweight Telecom hit a new all-time low and a strong kiwi dollar dragged exporters including Fisher & Paykel Appliances. The benchmark NZX-50 closed at 3,201, down 7 points or 0.21%.

Yesterday, the Federal Open Market Committee left rates unchanged and also made little change in the language behind the decision, stating that economic activity continued to strengthen and the labor market is stabilizing. The Fed said that its remaining mortgage security purchases are near completion and will end in March, while reiterating that economic conditions are likely to warrant low levels of the federal funds rate for an extended period.

In the statement, the Fed also reiterated that economic conditions are likely to warrant low levels of the federal funds rate for an extended period, although Kansas City Fed President Thomas Hoenig continued to vote for a change in the language.

Dollar has slipped after the US Fed statement yesterday and the dollar index is currently holding at one-month lows. Commodities rallied with crude oil trading near $82, adding nearly 1% while Gold managed to gain nearly by the same magnitude, holding above $1130 an ounce.