Markets Mar 24

Asian markets rally after Fed's unlimited QE

US central bank's strong measures address most shortfalls of previous actions, some analysts say

Asian markets rally after Fed's unlimited QE
Federal Reserve chairman has had a lot to ponder in recent days. But his latest moves appear to have finally calmed world markets. File photo: Getty/ AFP

(ATF) - Financial markets rallied in Asia after the US Federal Reserve announced new measures, implying unlimited quantitative easing, to support the flow of credit to households and businesses.

“We think these strong measures address many of the shortfalls from previous policy actions,” said DBS economists in a note. “While the virus counts are still accelerating in parts of Europe and the US, we could well be past peak fear (peak volatility) in the financial markets.”

The central bank measures come as the fast-spreading coronavirus pandemic has claimed 16,508 lives and infected nearly 380,000 people globally, and is pushing the global economy to a widely expected recession.

“By expanding open-ended asset purchases and providing credit directly to corporates for the first time ever, the US central bank has, again, compensated for the inaction of Congress,” Capital Economics said in a note, referring to the failed US Senate coronavirus stimulus bill.

The Democrats have criticized the bill saying it’s a bailout for big businesses and House Speaker Nancy Pelosi introduced a bill after the party drafted its own counterproposal titled the Take Responsibility for Workers and Families Act. She criticized the Republican bill for putting "corporations first, not workers and families”.

Stablising force

Meanwhile, the world’s second biggest economy said it aims to be the world economy’s stabilising force. 

Chen Yulu, a vice governor at the People’s Bank of China, said China’s economy is making “a major contribution to the global financial stability” and that it would “actively participate in the international coordination of macroeconomic policies.” Indeed, China chose not to cut interest rates last week in a surprise move, as it had more effective monetary policy tools for boosting credit.

This morning, Japan’s Nikkei 225 has risen 7%, while the Australian S&P ASX 200 is up 2.9%, Korea’s KOSPI surged 6.25% and the Hang Seng index climbed 4.1%. Regionally, the MSCI Asia Pacific ex-Japan index is up 3.9%.

The S&P futures are up 3.1% after Wall Street’s overnight fall when the Dow Jones Industrial Average dropped 3.04%, the S&P 500 retreated 2.93% and the Nasdaq Composite edged down 0.27%.