Shares jump on Fed stimulus

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TOKYO- Asian shares and Wall Street futures rallied on Tuesday as the formal start of the Federal Reserve’s corporate bond buying program boosted global investor sentiment and calmed earlier worries about a second wave of coronavirus infections.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.2 percent, its biggest one-day gain since June 1. Australian stocks rose 3.0 percent, while shares in China rose 1.2 percent.

US stock futures, the S&P 500 e-minis, were up 0.98 percent following a late rally on Wall Street on Monday. Treasury yields rose and the yield curve steepened.

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The Fed said it will start purchasing corporate bonds on Tuesday in the secondary market, one of several emergency facilities launched in the wake of the coronavirus pandemic.

Global equities had fallen sharply from late last week due to worries about the US economy and confirmation of a new coronavirus cluster in Beijing.

However, the Fed’s corporate bond purchases and data showing new infections in Beijing are under control helped equities quickly reverse course and head higher.

“Equities were overbought and corrected lower, but the S&P 500 has bounced off support because of the Fed,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.

“The markets will continue to go higher a long as economies continue to reopen and as long as the number of coronavirus cases is not large enough to stop the reopening.”

Sentiment in Asia got a further boost after health officials said there were 27 new coronavirus cases in Beijing, down from 36 new cases the previous day.

Japan’s Nikkei stock index and shares in South Korea were both on course for their biggest daily gain in two months.

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