Asia stocks gain slightly on Fed's low rate pledge

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Asia stocks gain slightly on Fed's low rate pledge

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U.S. Federal Open Market Committee said it was unlikely to raise interest rates before late 2014.

26 January,2012 10:27 am

Asian stock markets posted muted gains Thursday after the U.S. central bank pledged to keep interest rates low for another three years to nurture the countrys stubbornly slow economic recovery.Benchmark oil hovered just below $100 per barrel while the dollar fell against the euro and the yen.Hong Kongs Hang Seng Index jumped 1.2 percent to 20,342.71 on its first trading day since the Chinese New Year holiday. South Koreas Kospi rose 0.2 percent to 1,956.21. Benchmarks in Thailand and New Zealand also rose.Japans Nikkei was 0.4 percent lower at 8,853.02 as a weakening dollar pressured the countrys exporters. Benchmarks in Singapore and Malaysia also fell.Markets in Taiwan and mainland Chinese remained closed for the Chinese New Year. Markets in India and Australia were closed for public holidays.On Wednesday, the U.S. Federal Open Market Committee said it was unlikely to raise interest rates before late 2014. It had previously said it expected to keep rates low into the middle of 2013.The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there ever since. The announcement was a sign that the Fed expects the economy, which is improving, to need significant help for three more years.Analysts said some stock buyers rejoiced that the Fed was leaning toward promoting economic growth.With the FOMC sending out a strong signal that monetary policy is likely to remain accommodative for even longer than previously expected, risk assets are in a very good position, Stan Shamu of IG Markets in Melbourne said in an email.Wall Street welcomed the news, with the Dow Jones industrial average closing up 0.6 percent at 12,756.96 the highest close since May 10. The Standard & Poors 500 index rose 0.9 percent to 1,326.06. The Nasdaq composite index gained 1.1 percent to close at 2,818.31.Energy shares got a boost after crude briefly topped $100 per barrel on Wednesday. South Koreas oil refiner S-Oil Corp. rose 2.5 percent, while China National Offshore Oil Corp., known as CNOOC, rose 2.1 percent in Hong Kong.Hong Kong-listed Zijin Mining Group, Chinas largest gold miner, jumped 4.1 percent amid rising prices in the precious metal.But Japanese export shares didnt fare so well. Low interest rates in the U.S. would likely weigh on the dollar, giving the tenaciously strong yen another unwelcome boost.Yamaha Motor Corp. sank 2.4 percent, while Sony Corp. lost 1.2 percent. Toshiba Corp. was 1.2 percent down.Lee Kok Joo, head of research at Phillip Securities in Singapore, said the Fed announcement would likely have only a short-term affect on equities.Beyond that, you still need to look at the macro picture, he said, referring in particular to the sovereign debt crisis in Europe. Things are still pretty uncertain in the European region.Greece, which faces an important bond repayment deadline in March, is struggling to reach a deal with creditors to prevent a chaotic default on its massive debts. A default could trigger a financial crisis in Europe and beyond.Private sector investors that hold a large part of Greeces debt are being asked to swap their existing bonds with new ones of a reduced value, longer maturity and lower interest rate. Greece needs the deal if it is to avoid default this spring.Benchmark crude for March delivery was up 57 cents to $99.97 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose by 45 cents to finish at $99.40 per barrel in New York on Wednesday. At one point it was as high as $100.40.The prospect of low interest rates dragged on the dollar, since it reduces the returns that investors get from holding assets denominated in that currency. The euro rose to $1.3109 from $1.3084 late Wednesday in New York. The dollar fell to 77.69 yen from 77.81 yen.