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"Asia is looking to open strongly in the wake of the Fed decision.”

Asian Stocks Track U.S. Bounce on Dovish Fed as Oil Extends Jump
Emma O'Brien and Toshiro Hasegawa Mar 16, 2016 10:01 pm ET

(Bloomberg) -- The Federal Reserve provided a shot in the arm for riskier assets, with Asian stocks rebounding as oil rallied with high-yielding currencies after U.S. officials scaled back their interest-rate strategy amid concern over the global outlook. The dollar nursed losses.

Asia’s equity benchmark headed for its steepest climb in two weeks, rising with U.S. index futures after the Fed pared back the number of rate increases it anticipates enacting in 2016. Mining and energy shares drove gains as oil producers’ plans to meet over output sent U.S. crude above $39 a barrel and the weaker greenback buoyed copper futures. The dollar maintained losses that sent it to the lowest level since October versus major peers as emerging-market currencies jumped. The yen fell with gold, while bonds advanced.

In their much-anticipated statement, Fed officials cited the potential impact from weaker global growth and financial-market turmoil on the U.S. economy for keeping the target range for the benchmark federal funds rate between 0.25 percent and 0.5 percent. The third major central-bank policy event in a week, the Fed’s March meeting came in the wake of major stimulus announcements from policy makers in Europe and Japan that received a mixed reception in markets worldwide. The Bank of England meets Thursday. Oil’s rebound is also buoying sentiment, with overtures from OPEC members and other energy producers fueling optimism the global glut will be addressed.

“The Fed’s stance is relatively friendly,” Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo said by phone. “The difference in the stance between the market and the authorities has shrunk, and we’ve managed to get through an important event without drama. Investor sentiment has returned to a neutral zone from a bearish zone that had priced in too much concern.”

The Fed lowered its median projection for U.S. growth in 2016 and next year, and the median of policy makers’ quarterly projections implies two 25 basis-point increases this year, down from four forecast in December. Chair Janet Yellen said in February that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, spurring the dollar to strengthen and boosting some borrowing costs.

“The Fed has clearly been rattled by the nasty selloff seen at the start of 2016,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. “This was far more dovish than markets had expected. Asia is looking to open strongly in the wake of the Fed decision.”

Stocks

The MSCI Asia Pacific Index rallied 1.6 percent as of 9:43 a.m. Tokyo time, rising for the first time in three days as Japan’s Topix index gained 1.3 percent. The Kospi index in Seoul increased a second day, adding 1 percent.

Australia’s S&P/ASX 200 Index gained 1.3 percent, with commodity shares rising at least 3 percent, while New Zealand’s S&P/NZX 50 Index was down 0.1 percent after snapping a 12-day rally on Wednesday.

Standard & Poor’s 500 Index futures climbed 0.2 percent following the U.S. benchmark’s 0.6 percent advance. Contracts on Hong Kong’s Hang Seng and Hang Seng China Enterprises indexes were up 0.2 percent in most recent trading. Kospi index futures in Seoul rose 0.5 percent.

The Philippines updates its budget balance Thursday and both Hong Kong and Indonesia review key interest rates.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, was little changed after sliding 1.1 percent Wednesday to its lowest close since Oct. 20.

“The mantra we follow as investors is don’t fight the Fed, but it feels like what the Fed is saying now is don’t fight the market” on the rate path, said Matthew Whitbread, a Boston-based investment manager at Baring Asset Management.

The yen was paring back some of the past two days’ gains, losing 0.3 percent to 112.87 per dollar. The euro was steady at $1.1214 after gaining 1 percent last session, while the pound traded at $1.4254 following its first increase this week. The Bank of England is projected to hold rates Thursday and maintain current stimulus levels.

The Korean won led gains in Asia, rising 1.5 percent as the Malaysian ringgit jumped 1.3 percent. The Thai baht was up 0.3 percent.

The New Zealand dollar added another 0.4 percent after strengthening 1.9 percent on Wednesday. The country’s gross domestic product grew 0.9 percent last quarter, data Thursday showed, matching the pace of the previous three months and exceeding the 0.7 percent growth forecast by economists.

Data also boosted Australia’s dollar, which headed for its strongest close since July after the nation’s jobless rate declined more than economists had projected.

Bonds

The paring of the Fed’s projected path for rate increases boosted government bonds, with benchmark debt from Australia to South Korea pacing last session’s gains in U.S. Treasuries.

Yields on 10-year Australian notes fell for a third day, losing seven basis points, or 0.07 percentage point, to 2.56 percent. Rates on similar maturity Treasuries were up one basis point at 1.92 percent following Wednesday’s six basis-point drop.

Japanese bonds fell, with 10-year yields up three basis points to negative 0.053 percent after they slid seven basis points last session.

Commodities

West Texas Intermediate crude climbed 2 percent to $39.22 a barrel following its steepest one-day advance since Feb. 22.

Oil exporting countries plan to meet April 17 in Doha to discuss a commitment to freezing output, Qatar’s energy minister said. U.S. crude supplies also advanced 1.32 million barrels last week, according to government data out Wednesday, less than half the 3.2 million barrel-increase projected by analysts polled by Bloomberg.

Copper futures due in May rose 1.5 percent to $2.2665 a pound in New York, while gold, regarded along with the yen as a haven investment, dropped 0.2 percent to $1,260.21 an ounce, resuming losses after a 2.5 percent bounce on Wednesday.

©2016 Bloomberg L.P.

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