Asian Markets Take Breather After Surge on Fed Move

Asian markets were mixed on Monday following strong advances at the end of last week after the Federal Reserve announced a huge stimulus plan to boost the US economy.

The euro eased slightly as forex dealers took a breather after the single currency made healthy gains Friday following the unveiling of the open-ended bond-buying program.

Sydney added 0.29 percent, or 12.5 points, to close at 4,402.5, Seoul lost 0.26 percent, or 5.23 points to close at 2,002.35 and in late trade Hong Kong rose 0.20 percent.

Shanghai tumbled 1.43 percent in the afternoon with shares tied to Japanese firms hit by a territorial dispute between China and Japan that have sparked protests in China.

And in Bombay the Sensex in rose 0.90 percent in the morning after the government unveiled a slew of reforms aimed at boosting the economy, including allowing greater foreign investment in the retail and aviation sectors.

Tokyo and Kuala Lumpur were closed for public holidays.

The Fed said Thursday it would start a third program of bond-buying, by purchasing $40 billion a month in mortgage-backed bonds, known as quantitative easing (QE3), and would keep the scheme in place until it saw substantial improvement in the jobs market.

It also said it would extend its “Operation Twist” scheme of selling short-term debt and buying long-term bonds with the proceeds in order to keep long-term interest rates as low as possible.

“The big question is how long this Fed-inspired rally will continue as QE3 was the last bazooka to be used in [its] arsenal,” says Jason Hughes, analyst at IG Markets Singapore.

“When the smoke clears, there is a lot of uncertainty over what such stimulus can do for the global economy,” he told Dow Jones Newswires.

The Fed move came a week after the European Central Bank said it would buy unlimited quantities of debt from under-pressure eurozone nations such as Spain and Italy in a bid to cut their borrowing costs, which had hit danger levels.

On Wall Street Friday the Dow rose 0.40 percent, the S&P 500 added 0.40 percent and the Nasdaq gained 0.89 percent.

Thursday’s Fed announcement, which dealers welcomed as going further than expected because it is open-ended, also gave a huge boost to the euro as dealers became more risk-on, although it eased a tad Monday.

The single currency jumped to $1.3140 at one point Monday before falling back to $1.3122 in the afternoon, compared with $1.3127 late Friday in New York, while it was at 102.72 yen from 102.90 yen.

The dollar bought 78.32 yen, compared with 78.28 yen in New York.

In Shanghai shares with links to Japan were hit as thousands of demonstrators mounted protests across China, including an attempt to storm the Japanese embassy, over an islands dispute between Tokyo and Beijing.

Demonstrators in the southern city of Shenzhen — some holding a banner calling for a “bloodbath” in Tokyo — clashed with riot police, who fired tear gas to disperse the crowd, Hong Kong broadcaster Cable TV showed.

On oil markets, New York’s main contract, light sweet crude for delivery in October, gained 14 cents to $99.14 and Brent North Sea crude for November delivery added 26 cents to $116.92.

Gold was at $1,773.60 at 0620 GMT compared with $1,773.30 on Friday.

In other markets:

— Taipei rose 0.31 percent, or 24.17 points, to 7,762.22.

Leading smartphone maker HTC surged 5.90 percent to Tw $314.0 while Hon Hai Precision was 0.52 percent higher at Tw $97.5.

— Wellington climbed 0.66 percent, or 24.89 points, to 3,817.23.

Telecom gained 0.60 percent to NZ $2.50 and Fletcher Building was up 2.1 percent at NZ $6.94.

Agence France-Presse