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Asian Equities Mainly Higher After US Fed Signals About Low Interest Rates

TOKYO (AP) — Asian stocks were largely higher Monday as investors interpreted the comments from the head of the US Federal Reserve as signals that low-interest rates would persist for a while.

The Japanese benchmark Nikkei 225 rose 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 remained virtually unchanged at 3,133.72. Hong Kong’s Hang Seng fell 0.3% to 25,344.79, while the Shanghai Composite was at 3,535.19, up 0.4%.

Regional investors are also looking forward to data expected to be released Tuesday on China’s 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, surpassing Wednesday’s previous record high. 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.

Fed Chair Jerome Powell’s speech was pivotal as US equities have set record after record this year, largely due to the Fed’s massive efforts to prop up the economy and financial markets. Earnings became increasingly cautious as markets began to watch for a possible end to the Fed’s aid.

Last week, Powell noted mistakes of the past that led policymakers to take premature steps in the face of apparently high inflation. He made it clear that a slowdown in Fed bond purchases does not mean a hike in short-term interest rates is imminent. That would require the labor market and inflation to get in the way of “significantly tougher” testing.

“We have a lot of ground to cover to maximize employment,” Powell said.

Shares of US companies whose profits are most closely tied to the economy made the biggest gains after the speech.

One problem Powell noted was the delta strain of the coronavirus, which remains a global problem. The delta variant is behind the recent rise in COVID-19 infections in Asia, where vaccine rollouts have been slower than in parts of the US and Europe.

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“With the spread of the delta variant still widespread and the vaccination wave slow, Singapore is the exception, the road out of the pandemic is unpredictable, fraught with setbacks and periodic lockdowns,” said Venkateswaran Lavanya of Singapore’s Mizuho Bank.

The delta variant has already slowed down some economic activity. In the U.S. a report on Friday showed that consumer spending in the country rose 0.3% in July from June, a sharp slowdown from the 1.1% rise in the previous month. That’s a big deal when consumer spending has been the driver of the US economy and its growth has slowed, even though income growth for Americans accelerated to 1.1% last month.

In energy trading, the US benchmark crude oil lost 10 cents to $68.64 a barrel. Brent oil, the international standard, added 10 cents to $72.80 a barrel.

In currency trading, the US dollar fell from 109.84 yen to 109.74 Japanese yen. The euro cost $1.1806, down from $1.1792.