© Reuters. FILE PHOTO: A man wearing a protective face mask speaks on his cellphone in front of a Nikkei index screen in Tokyo
Posted by Wayne Cole
SYDNEY (Reuters) – Asian stocks hit record highs Thursday as investors digested recent meaty gains as the bulls were bolstered by the promise of endless free money after a harmless reading of US inflation and a cautious outlook from the Federal Reserve.
The lack of liquidity added to liquidity as the markets in China, Japan, South Korea, and Taiwan were all on vacation.
MSCI's broadest index for stocks in the Asia-Pacific region outside Japan rose 0.1% after rising to over 10% for four sessions this year.
closed after ending at a 30-year high on Wednesday while Australia's main index stayed near an 11-month high.
With China turned off, there was little reaction to news that the Biden government would add "new targeted restrictions" to the Asian giant on certain sensitive technology exports, while maintaining tariffs for the time being.
Futures for the and NASDAQ were both stable after hitting historic highs on Wednesday. EUROSTOXX 50 futures and futures barely moved.
However, the outlook for further global stimulus was significantly boosted overnight by a surprisingly weak level of US core inflation, which fell to 1.4% in January.
Federal Reserve chairman Jerome Powell said he wanted to hit inflation at 2% or more before he even thought of curtailing the bank's super-easy policies.
In particular, Powell stressed that once the effects of the pandemic were removed, unemployment was closer to 10% than the reported 6.3%, which is far from full employment.
As a result, Powell called for a "society-wide commitment" to reduce unemployment, which analysts saw as strong support for President Joe Biden's $ 1.9 trillion stimulus package.
In fact, Westpac economist Elliot Clarke estimated a cumulative incentive of over $ 5 trillion worth 23% of GDP to repair the damage caused by the pandemic.
"The historical experience is a strong justification for not addressing undesirable inflationary pressures until they have been seen after reaching full employment," he said.
"To that end, the financial health is expected to continue to provide strong support for the US economy and global financial markets in 2021 and likely through 2022."
The mix of bottomless Fed funds and a tame inflation report took some relief from the bond market pain, leaving 10-year returns at 1.12% after a 1.20% high earlier in the week.
This, in turn, weighed on the US dollar, which slipped to 90.395 on a basket of currencies and moved away from a 10-week high of 91.600 as of late last week.
The dollar fell from a recent high of 105.76 yen to 104.57 yen, while the euro rose from its low of $ 1.1950 to $ 1.2122.
In the commodities markets, gold was trading at $ 1,838 an ounce as investors drove platinum to a six-year high on increased demand from the automotive sector. (GOL /)
Oil prices took a breather after seeing their longest winning streak in two years as supply cut back from producers in hopes that the introduction of vaccines will lead to a recovery in demand. (OR)
"The current price level is healthier than the actual market and depends entirely on supply cuts as demand has yet to recover," warned Björnar Tonhaugen of Rystad Energy.
Futures were down 40 cents to $ 61.07 while they fell 36 cents to $ 58.32 a barrel.