World shares advance after Fed signals support easing

AP – World shares were mostly higher yesterday after the Federal Reserve signalled it may begin easing its extraordinary support measures for the United States (US) economy later this year.

Benchmarks rose in Paris, London, Hong Kong, Shanghai and most other markets. US futures were higher. Markets were closed in Tokyo for a holiday.

The US central bank indicated it may start raising its benchmark interest rate sometime next year, earlier than it envisioned three months ago. It also said it will likely begin slowing the pace of its monthly bond purchases “soon” if the economy keeps improving. The Fed and other central banks have been buying bonds throughout the pandemic to help keep long-term interest rates low.

Markets also were reassured after Evergrande, one of China’s biggest private real estate developers, said it will make a payment due yesterday on a domestic bond. That likely eased some concerns about heavily indebted Chinese real estate developers and potential ripple effects of possible defaults.

“The focus is now shifted to its dollar bond interest payment due today after it resolves its domestic bond payment,” Jun Rong Yeap of IG said in a commentary.

A currency trader passes by screens showing the Korea Composite Stock Price Index. PHOTO: AP

“Markets will be awaiting further resolution on its subsequent bond payments in order to have a greater conviction on easing contagion risks, which partially aided to drive markets higher overnight,” Yeap said.

Evergrande Group’s Hong Kong-traded shares gained 16 per cent yesterday. They have lost about 80 per cent of their value since the beginning of the year.

Germany’s DAX climbed 0.8 per cent to 15,635.96 and the CAC 40 in Paris advanced 0.7 per cent to 6,683.52. Britain’s FTSE 100 was 0.4 per cent higher, at 7,113.83.

The futures for the Dow industrials and the S&P 500 rose 0.6 per cent.

In Asia, Hong Kong’s Hang Seng gained 1.2 per cent to 24,499.62. The Shanghai Composite index added 0.4 per cent to 3,644.22. Australia’s S&P/ASX 200 surged 1 per cent to 7,370.20. South Korea’s Kospi dropped 0.4 per cent to 3,127.58.

At a news conference, Federal Reserve Chair Jerome Powell said Wednesday that the Fed plans to announce as early as November that it will start to taper its monthly bond purchases, should the job market maintain its steady improvement.

The S&P 500 rose one per cent to 4,395.64, breaking a four-day losing streak. The benchmark index initially climbed 1.4 per cent after the Fed issued its statement.