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Markets rally on Powell comments, China boosted by duty cut

HONG KONG (AFP) – Asian markets advanced yesterday after Federal Reserve chief Jerome Powell said officials would take a careful approach to rate hikes, while Chinese shares soared after the government cut the duty on trades.

In a much-anticipated speech on Friday, the United States (US) central bank boss left the door open to more tightening but repeated his pledge that decision-making would be data-dependent as policymakers try to bring inflation to heel.

Powell’s comments suggested borrowing costs would be held at a 22-year high of 5.25-5.5 per cent next month, though investors remain concerned more could come before year’s end.

While inflation is coming down, markets have been hit in recent weeks by a strong run of economic data – particularly on jobs – that has been seen as putting pressure on the Fed to keep hiking interest rates.

“If the data continues to show an ease in labour market tightness and price pressures, then the Fed is likely done with its tightening cycle,” said National Australia Bank’s Rodrigo Catril.

“If the data doesn’t play ball, then further tightening should be expected. Thus, upcoming key market data releases (inflation and labour market) are likely to set the tone for markets over coming months.”

A person rides past an electronic stock board showing Japan’s Nikkei 225 index in Tokyo. PHOTO: AP

Analysts said the focus on data meant this week’s inflation and jobs figures take on even more significance.

The remarks sent US stocks lower initially before they bounced back to end Friday on a positive note.

And Asia followed suit yesterday, with Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, Mumbai, Bangkok, Jakarta and Wellington all enjoying a strong start to the week.

Paris and Frankfurt both rose in the morning. London was closed for a holiday.

Shanghai was boosted by China’s decision to slash the tax paid on stock trades for the first time since 2008 as authorities battle to support the world’s second-largest economy.

The Ministry of Finance and its State Taxation Administration said in a joint statement the move was designed to “invigorate the capital market and boost investor confidence”.

Officials also said they would slow the pace of new listings, which usually suck up market liquidity.

The measures provided some joy among traders and come as Chinese leaders struggle to kickstart the stuttering economy, with a series of pledges failing to lift optimism.

“The scale, force and speed of the measures all beat expectations,” said analysts at China International Capital Corp.

“The increasing force of the policy tools will lift market confidence, amplifying the positive signal for the market.”

However, the gains in China were well off their initial five per cent advance owing to ongoing worries about the economy.

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