Hong Kong, China (AFP) — Equities mostly rose as investors struggled for traction in Asia on Wednesday following a tepid lead from Wall Street, with hopes for another vast United States (US) virus relief package offset by political upheaval in Washington and surging virus cases.
Most of Asia was on the up, though gains were limited as investors were reluctant to pile in owing to near-term worries about the virus surge, which has caused several countries to reimpose lockdowns for the next several weeks as they battle to roll out vaccines.
I expect it to be a little while before we’re even talking about tapering on our purchases of government and mortgage-backed securities.
Manila, Tokyo, Hong Kong, Sydney, Seoul, Singapore, Taipei and Jakarta were all in positive territory but Shanghai and Wellington edged down.
There had been concerns on trading floors that while the new stimulus would give a huge boost to the US economy, it would also push up inflation later, which could force the Fed to lift borrowing costs or tighten monetary policy.
But those fears were soothed by top bank officials, who said they were in no rush to turn off the taps.
“We want to get through the pandemic and sort of see where the dust settles, then we will be able to think about where to go with balance-sheet policy,” St. Louis Fed president James Bullard told the Wall Street Journal.
“I expect it to be a little while before we’re even talking about tapering on our purchases of government and mortgage-backed securities,” Boston Fed chief Eric Rosengren added.
Similar comments from the usually hawkish Esther George provided extra reassurance.
“What I think investors are most focused on is the digesting of what is shifting fiscal policy,” said David Bianco at DWS Group. “We’re beginning to lose the anchor on some long-term key benchmark interest rates.”
The prospect that policy will remain loose for some time weighed on the dollar and pushed 10-year US Treasury yields down from their March highs.
Still, Stephen Innes at Axi said markets had been boosted by vast government and central bank support and it was “hard to imagine the taper tantrum debate will lessen any as we progress through 2021, especially when inflation picks up.”
“I suspect investors will constantly be revisiting the policy, fidgety over the fear of one or even both policy balloons deflating at some point in 2021,” he said.