SYDNEY – Asian shares rested at record highs on Thursday as investors digested recent meaty gains, though the promise of endless free money to sustain buying was reaffirmed by benign US inflation data and a very dovish outlook from the Federal Reserve.
Adding to the torpor was a lack of liquidity as markets in China, Japan, South Korea and Taiwan were all on holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1 percent, having climbed for four sessions straight to be up over 10 percent so far this year.
Japan’s Nikkei was shut after ending at a 30-year peak on Wednesday, while Australia’s main index held near an 11-month top.
Futures for the S&P 500 and NASDAQ both dipped 0.1 percent, having again hit historic highs on Wednesday.
Still, the outlook for more global stimulus got a major boost overnight from a surprisingly soft reading on core US inflation, which eased to 1.4 percent in January.
Federal Reserve Chair Jerome Powell said he wanted to see inflation at 2 percent or more before even thinking of tapering the bank’s super-easy policies.
Notably, Powell emphasized that once pandemic effects were stripped out, unemployment was nearer 10 percent than the reported 6.3 percent and thus a long way from full employment.
As a result, Powell called for a “society-wide commitment” to reducing unemployment, which analysts saw as strong support for President Joe Biden $1.9 trillion stimulus package.
Indeed, Westpac economist Elliot Clarke estimated over $5 trillion in cumulative stimulus, worth 23 percent of GDP, would be required to repair the damage done by the pandemic.
“Historical experience provides strong justification to only act against undesired inflationary pressures once they have been seen, after full employment has been achieved, he said. – Reuters