Asian stocks rally after Fed lowers rate hike forecasts

Hong Kong - Stocks, emerging market currencies and oil all rallied in Asia on Thursday after Federal Reserve chief Janet Yellen lowered expectations for US interest rate hikes this year.

In a statement following the Fed's latest policy meeting, Yellen cited concerns about the impact on the US economy of recent turmoil in global markets, weakness in China and Europe, and the plunge in crude prices.

Her comments came after the central bank cut its outlook for US growth for this year and painted a picture of the economy that was less upbeat than many had expected.

Crucially it forecast a slower pace of interest rate rises than foreseen in December, when it announced its first hike in almost a decade.

Yellen said policymakers had opted for "a slightly more accommodative path" given "soft" US business investment and weak exports in recent months.

The prospect of rates staying at ultra-low levels for some time boosted US shares, gains that extended into Asian trade.

Hong Kong added 1.2% and Shanghai also put on 1.2%, while Sydney ended up one percent and Seoul was 0.7% higher. Singapore added one percent and Manila rallied almost 2%.

However, Tokyo succumbed to late selling to end 0.2% down.

In early European trade London added 0.6%, Frankfurt gained 0.7% and Paris put on 0.9%.

"The Fed's stance is relatively friendly," Mitsushige Akino, executive officer at Ichiyoshi Asset Management in Tokyo, told Bloomberg News.

"The difference in the stance between the market and the authorities has shrunk, and we've managed to get through an important event without drama."

Dollar tumbles

The dollar tumbled to ¥111.84 on Thursday, down from ¥112.57 yen in New York.

The euro jumped to $1.1249 on Thursday from $1.1226 in US trade and well up from the $1.1090 in Tokyo on Wednesday.

The dollar plunged against emerging currencies, with the South Korean won up 1.7%, the Australian dollar 2.3% higher, Indonesia's rupiah put on 1.4% and the Thai baht was 0.6% higher.

There were also sharp gains for the New Zealand dollar and Singapore dollar. The oil-dependent Malaysian ringgit rallied 1.3%.

On oil markets, US benchmark West Texas Intermediate surged almost six percent Wednesday and Brent more than 4% as the weaker dollar makes the commodity cheaper for clients using other currencies. In afternoon trade Thursday WTI added 2.2% and Brent 1.3%.

Adding to buying sentiment was news that key producers including Saudi Arabia and Russia will hold a meeting next month to discuss output levels, with hopes they will agree a freeze.

The jump in crude boosted energy firms, with Hong Kong-listed CNOOC up more than 5% and PetroChina 4.4% higher.

In Sydney, Rio Tinto gained 2.4% and BHP Billiton was also up 2.4%.

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
I'm not really directly affected
18% - 1602 votes
I am taking a hit, but should be able to recover in the next year
23% - 2103 votes
My finances have been devastated
35% - 3166 votes
It's still too early to know what the full effect will be
25% - 2279 votes