Markets recover amid solid US growth news

01-Feb-2014 Intellasia | AFP | 6:00 AM Print This Post

Markets recovered their poise Thursday amid signs of stabilisation in emerging markets and after solid US growth figures reinforced hopes that the recovery of the world’s largest economy is gaining momentum.

The US Federal Reserve’s decision Wednesday to further “taper,” or reduce, its mortgage and long-term bond purchases had earlier roiled markets, which have been stuttering this year amid worries over emerging economies.

Though the rationale for the “tapering” is that the US no longer needs extraordinary support, a significant amount of the money created by the purchases flowed into stocks and other assets with higher returns. The prospect that those sources of liquidity may dry up has rattled markets across the globe.

Analysts said the fact that the US economy grew at an annualised rate of 3.2 percent in the final quarter of 2013 provided ample justification for the Fed’s policy approach. Over the last couple of months it has decided to trim its monthly bond purchases by a total of $20 billion to $65 billion from February.

“Signs of positive growth for 2014 are soothing investors’ wounds,” said Andrew Wilkinson, chief market analyst at Interactive Brokers.

In Europe, the FTSE 100 index of leading shares fell 0.1 percent to close at 6,538.45 while Germany’s DAX rose 0.4 percent to 9,373.48. The CAC-40 in France gained 0.6 percent to 4,180.02.

In the US, the Dow Jones industrial average was up 0.9 percent at 15,885 while the broader S&P 500 index rose 1.3 percent to 1,796.8.

One offshoot of the Fed’s further tapering was a rebound in the dollar – a consequence of the prospect of less money being created. The euro was down 0.8 percent at $1.3551 while the dollar rose 0.6 percent to 102.86 yen.

Earlier in Asia, continued upward pressure on the yen, viewed as a safe haven from turmoil in emerging markets trading, weighed on Japan’s Nikkei 225 index. It fell 2.5 percent to 15,007.06.

A survey confirming that China’s manufacturing contracted in January added to the gloom, with Hong Kong’s Hang Seng down 0.5 percent to 22,035.42.


Category: FinanceAsia

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