Asian Stocks Up, Investors Continue to Monitor Fed Taper Talk

Stock Markets1 hour ago (May 26, 2021 11:17PM ET)

(C) Reuters.

By Gina Lee – Asia Pacific stocks were mostly up on Thursday morning as investors await clarity on inflation trends and tapering prospects.

Japan’s Nikkei 225 fell 0.57% by 10:52 PM ET (2:52 AM GMT), as investors await data, including the Jobs/applications ratio for April and the Tokyo Core Consumer Price Index for May, to be released on Friday.

South Korea’s KOSPI fell 0.84%. The Bank of Korea handed down its policy decision earlier in the day and kept the interest rate unchanged at 0.50%.

In Australia, the ASX 200 edged up 0.17%. Australia’s second-most populous state of Victoria announced a one-week COVID-19 lockdown from May 27 to June 3 to deal with a fresh COVID-19 outbreak.

Hong Kong’s Hang Seng Index inched up 0.08%. China’s Shanghai Composite inched was up 0.91% while and the Shenzhen Component was up 0.24%.

Investors continue to monitor how the price pressure will impact Fed’s current dovish monetary policy even if policymakers have insisted that they expect that the inflation will be temporary and the central bank will not hike interest rate for a while.

“Investors appear to be giving the Fed the benefit of the doubt with their transitory inflation forecast, but we suspect the window of confidence could close without supporting evidence in coming months,” Craig W. Johnson, technical market strategist at Piper Sandler & Co., told Bloomberg.

Johnson also expects economic uncertainty and volatility will likely stay high as investors await Fed clarification on whether it will taper asset purchases.

Randy Quarles, the Fed’s vice chair for supervision, said on Wednesday that it will become important at some stage for the central bank to discuss tapering its asset purchase program should inflation rise.

Though “we need to remain patient” in any policy shift, “if my expectations about economic growth, employment and inflation over the coming months are borne out … and especially if they come in strong … it will become important for the (Federal Open Market Committee) to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings,” Quarles added, echoing comments made by Fed Vice Chairman Richard Clarida earlier in the week.

Some investors remained skeptical even amid Fed reassurances that it would not alter its current dovish policy in the short term.

“While the efforts by various Fed speakers appeared to have assuaged market concerns, doubt remains,” GSFM investment strategist Stephen Miller told Reuters.

“What that means is that after a period where monthly inflation reports have largely been sidelined as a market focus, that they once again assume primacy they once enjoyed as the statistical report that matters,” Miller added.

On the data side, investors await U.S. data, including GDP for the first quarter of 2021, due to be released later in the day. Other data to be released include initial jobless claims for the past week, as well as Core Durable Goods Orders and Pending Home Sales for April.

Asian Stocks Up, Investors Continue to Monitor Fed Taper Talk

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