Asian Stocks Advance as Dovish Fed Gives Boost to Risk Assets

  • MSCI Asia Pacific index heads towards a fifth weekly gain
  • Energy shares advance as crude climbs above $39 in New York

Asian stocks rose to the highest level since January and measures of expected equity volatility declined after the Federal Reserve pared back expectations for interest-rate increases this year.

The MSCI Asia Pacific Index gained 2 percent to 128.63 as of 5:06 p.m. in Tokyo, with commodity and financial shares leading the advance. The Fed’s signal that borrowing costs won’t rise as fast as officials previously forecast propelled U.S. stocks to their highest level this year. Japanese shares slipped after guidance from the U.S. central bank helped strengthen the yen.

“The Federal Reserve has once again come to the market’s rescue,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “The Fed offered to meet the market in the middle, with its dot plot of expectations adjusted to reflect only two rate rises this year, down from four previously.”

Fed officials kept the target range for the benchmark federal funds rate unchanged at 0.25 percent to 0.5 percent, citing the potential impact from weaker global growth and financial-market turmoil on the U.S. economy. The median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.

“Emerging-market and Asian currencies should do well because at least for the next month or two the Fed is likely to remain dovish unless data picks up really strongly," said Binay Chandgothia, a Hong Kong-based fund manager at Principal Global Investors, which manages $331 billion, told Bloomberg TV. “Asian currencies tend to be positively correlated with asset returns in Asia, which means equities in Asia should do well.”

The MSCI Asia Pacific gauge is up 14 percent from this year’s low last month after commodity producers and financial shares rallied. The Bank of Japan refrained from expanding monetary policy this month, while the European Central Bank boosted an already unprecedented stimulus package.

The Hang Seng Volatility Index declined declined 6.7 percent. The India NSE Volatility Index sank 2.1 percent and the Nikkei Stock Average Volatility Index slipped 2.9 percent. All three gauges of expected volatility are now trading below the average level over the past year.

Oil Advances

Energy shares advanced as crude climbed above $39 a barrel in New York after data showed a drop in U.S. output. Origin Energy Ltd. and Santos Ltd., which explore for crude and gas, both rose 5 percent.

Japan’s Topix index lost 0.1 percent. The yen gained 0.8 percent to 111.62 per dollar after climbing 0.6 percent on Wednesday.

Toshiba Corp. slumped 8 percent. The firm is under investigation by the U.S. over allegations that it hid $1.3 billion in losses at its nuclear power operations, according to two people familiar with the matter. The Justice Department and the Securities and Exchange Commission are looking into whether fraud was committed.

South Korea’s Kospi index rose 0.7 percent. Australia’s S&P/ASX 200 Index gained 1 percent. New Zealand’s S&P/NZX 50 Index, the best performing developed market benchmark gauge this year, added 0.2 percent.

Hong Kong’s Hang Seng Index advanced 1.2 percent and the Hang Seng China Enterprises Index of mainland firms listed in the city rose 2.4 percent. The Shanghai Composite climbed a fifth day, rising 1.2 percent.

China Mobile Ltd. declined 2.1 percent in Hong Kong trading after saying profit fell, missing analyst estimates, as cheaper plans damped revenue growth at the world’s largest phone carrier.

Futures on the Standard & Poor’s 500 Index advanced 0.4 percent. The S&P 500 rose 0.6 percent Wednesday, closing at its highest level since Dec. 31 as mining and energy shares rallied. The benchmark measure has climbed 11 percent from a February low.

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