Asian stock markets rise after Fed's stimulus plan
Thursday, November 4, 2010; 1:32 AM
BANGKOK -- Asian stock markets climbed Thursday as investors took heart from the Federal Reserve's plan to buy $600 billion in government bonds in an effort to inject life into the faltering U.S. economy.
Oil prices rose above $85 a barrel after the U.S. central bank said it would buy $75 billion in Treasury bonds per month through the middle of next year. In currencies, the dollar was down against the yen and the euro.
The Fed's announcement was good news for stocks because the increased demand for Treasurys created by the Fed's purchases will push up bond prices and drag down interest rates, making returns on stocks more attractive.
But there are doubts about whether the Fed's move will achieve its main objective of stimulating lending and spending - seen as key to creating jobs and resuscitating the U.S. housing market.
It was smaller than what Fed policymakers called their "shock and awe" approach to the 2008 financial crisis, when the Fed bought $1.7 trillion of securities to lower long-term interest rates.
"It remains to be seen how much that accomplishes, but I guess you could argue that by contributing to a more confident mood, the Fed is accomplishing all it can hope for," said David Cohen, an economist with Action Economics in Singapore.
"This is still uncharted territory in the sense that it's not going to be a magic bullet as far as the U.S. economy is concerned," he said.
Japan's benchmark Nikkei 225 stock index jumped 204.94 points, or 2.2 percent, to 9,364.92 despite pressure on exporters as the dollar fell below the 81 yen level.
South Korea's Kospi added 0.3 percent to 1,942.08 and Australia's S&P/ASX 200 was up 0.4 percent at 4,815.00. Hong Kong's Hang Seng index climbed 0.9 percent to 24,363.54. China's Shanghai Composite Index rose 0.6 percent to 3,047.78.
Elsewhere, markets in Malaysia, Singapore and Taiwan advanced while New Zealand's index fell.
In New York on Wednesday, the Dow Jones industrial average rose 26.41 points, or 0.2 percent, to 11,215.13, the highest close in two years after the Fed outlined plans to buy $600 billion in bonds to stimulate the economy.
The Fed's announcement came after American voters frustrated by persistent unemployment and the limp housing market handed control of the House to Republicans to Republicans and gave the party a bigger voice in the Senate.
The split will probably make it harder for President Barack Obama to enact any major economic initiatives and could put more pressure on the Fed to get the wobbly economy back on firmer footing.
In currencies, the dollar fell to 80.84 yen from 81.05 yen in New York late Wednesday. The euro rose to $1.4131 from $1.4122.
Benchmark crude for December delivery was up 64 cents at $85.33 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 79 cents to settle at $84.62 a barrel Wednesday.