Wednesday, August 22, 2012

Asian stock markets 8/23/2012

Asian stock markets 8/23/2012 : Asian stock markets were mostly higher early Thursday as investors weighed the possibility that more help for the U.S. economy from the Federal Reserve might be on the way.

Stocks got a boost from the release of minutes the last major meeting of the Fed, which showed members of its Open Market Committee favoring additional action to help the U.S. economic recovery unless substantial strengthening occurs.

Hong Kong's Hang Seng index rose 0.9 percent to 20,057.10 and South Korea's Kospi added 0.3 percent to 1,941.03. Australia's S&P/ASX 200 added 0.6 percent to 4,402.50. Japan's Nikkei 225 index was marginally down at 9,127.65.

Benchmarks in Singapore, Taiwan and mainland China also rose.

The Fed's last policy meeting preceded a slew of positive reports including retail sales, industrial output and non-farm payrolls, which boosted the dollar and lifted 10-year Treasury yields to a three-month high above 1.85 percent last week, up sharply from a record low 1.38 percent hit on July 25.

The positive economic reports have scaled back expectations somewhat, but hopes remain for the Fed to take further stimulus at its September 12-13 meeting, ranging from a third round of bond buying known as quantitative easing to extending the period of very low interest rates beyond 2015.

"Since the meeting of the minutes, the environment has changed to make it doubtful if the Fed will take as aggressive an action as markets appear to have taken from the minutes," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, noting positive U.S. data, improving mood surrounding Europe's woes and surging grains prices.

Deepening quantitative easing could fuel inflationary pressures as money will likely flow into grains, further pushing up prices of U.S. corn and soybean which hit record highs this summer due to the country's worst drought in 56 years, Saito said.

"It may still take some stimulus but that has already been anticipated, and the Fed has merely kept such expectations intact. Players probably sold the dollar to adjust their positions ahead of meetings surrounding Greece," said Saito.

Market sentiment has also been underpinned after the ECB suggested it would come up with measures to contain surging yields of indebted Spain and Italy.

While market focus has mainly shifted to Spain, the verdict on the fate of deeply troubled Greece has yet to be delivered.

Greek Prime Minister Antonis Samaras is seeking to convince other European officials that his country should be given more time to meet targets for deficit cuts, warning of bankruptcy if the money does not arrive.

Asian credit markets firmed slightly, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by two basis points.

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