Asia-Pacific equities gained after hopes for US fiscal stimulus helped boost stocks on Wall Street, while investors looked ahead to an interest rate decision by the Federal Reserve.
Japan’s Topix index rose 1.3 per cent in early trading in the region on Wednesday while Hong Kong’s Hang Seng added 1 per cent. Australia’s S&P/ASX 200 and China’s CSI 300 of Shanghai- and Shenzhen-listed shares both edged 0.4 per cent higher.
Overnight, US shares snapped a four-day losing streak with the S&P 500 closing 1.3 per cent higher after congressional leaders announced discussions that investors hope could lead to a new stimulus deal after months of political stalemate.
Analysts — and Fed chair Jay Powell — believe that renewing fiscal support in the US months after earlier measures were allowed to lapse is vital to prevent the country’s economic recovery from faltering further.
The US central bank is expected to leave its benchmark interest rate at a record low when it meets on Wednesday for the final time this year. But some analysts expect the Fed to extend its bond purchasing programme.
“If markets begin to believe in a slightly earlier-than-feared end to the pandemic, they may also begin to anticipate an earlier-than-expected tapering of bond purchases,” said David Kelly, chief global strategist at JPMorgan Asset Management.
Concerns over any tapering could push 10-year Treasury yields above 1 per cent within weeks, he believes. The yield on 10-year Treasuries stood at 0.905 per cent on Wednesday.
“The Fed could be tempted to do more . . . [such as] recommit to running a very easy monetary policy even further into the expansion,” Mr Kelly added. “Such a commitment could well put further downward pressure on the dollar, boosting both [US] exports and the dollar value of international stocks and bonds.”
Futures for the S&P 500 were 0.1 per cent lower. Trading in these contracts can be volatile so far ahead of US markets opening due to thin liquidity.
In currencies, the pound fell 0.2 per cent to $1.3438 after surging almost 1 per cent against the dollar on Tuesday on reports of progress towards a UK-EU trade deal.