Asian markets rise after Fed says it won’t raise interest rates

Asia markets cheered on Thursday, as a dovish United States (US) Federal Reserve signalled it would slow down its pace of interest rate hikes, putting an ease on concerns to the rising cost of borrowing. This is even though weak economic data results from China posted yet another monthly slump in manufacturing performance.

Dealers are also watching out for developments on the closed-door trade talks between China and the US, to see if any positive developments could pan out from there.

By mid-afternoon in Singapore, Singapore’s Straits Times Index rose 0.42% or 13.30 points, at 3,187.68, while FTSE Bursa Malaysia Kuala Lumpur Composite Index gained 0.47% or 7.99 points, at 1,692.10.

Chinese indices also saw positive trading with the Hang Seng Index higher by 1.09% or 300.53 points, at 27,943.38, while the Shanghai Composite Index was 9.00 points or 0.35% higher, at 2,584.57.

Tokyo’s Nikkei 225 index gained 1.06% or 216.95 points, to close Thursday’s trading at 20,773.49 points, while the broader Topix Index was higher by 1.08% or 16.73 points, at 1,567.49 points.

Fed interest rates unchanged

The Fed on Wednesday held interest rates steady as expected, but it also removed its notion of ‘further gradual increases’ for its interest rates, adding that it would be ‘patient’ before making any further moves as the country works through global growth risks and trade issues with other countries.

'The case for raising rates has weakened somewhat,' the Fed’s chair, Jerome Powell said.

The greenback struggled near a three-week trough against its major peers as investors reacted to the Fed’s changed tone.

China’s manufacturing activity contracts for the second month

The weaker Chinese data could have been a dampening contributor to the positive but muted trading on Thursday.

China’s manufacturing sector continued to contract for the second consecutive month in January as the country remains embroiled in a scathing trade war with the US.

The official manufacturing purchasing managers’ index (PMI) was at a score of 49.5 points, higher than the 49.4 points in December. The performance was however, better than economists’ expectations.