Dovish Fed lifts Nikkei 225 by 1.6%

After a modest start due to a strengthened yen, Japan’s Nikkei 225 jumped 1.6 per cent and is now on track for a fifth consecutive weekly gain.

Sydney’s S&P/ASX 200 rose 1.1 per cent, placing it on track for its best session in a month after slumping to a two-month low on Wednesday (18 June), reports FTAdviser sister publication FastFT.

Hong Kong’s Hang Seng Index also rose 0.1 per cent..

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The Federal Reserve’s monetary policy statement managed to please both equity and bondholders in the US. The Fed ignored recent data showing an uptick in inflation, easing concerns that rising prices would persuade it to adopt a more hawkish stance.

“The central bank played down recent higher inflation as ‘noise’, while also suggesting that stock valuation was not outside historical norms,” said Gary Yau at Credit Agricole

The Fed’s take on the US economy was also upbeat, yet it continued to pledge to hold interest rates low.

The S&P 500 jumped 0.8 per cent, the best session for US stocks in a month, to 1956.98. The CBOE Vix volatility index, also known as the “fear gauge”, fell 12 per cent, closing at its lowest level since February 2007.

Perceptions that the Fed will hold interest low helped drive investors into Treasuries, sending the yield on the 10-year note down 6 basis points to 2.59 per cent.

The drop in yields put some pressure on the dollar, with the currency’s value against a weighted basket of peers falling more than 0.2 per cent.

The Japanese yen strengthened 0.2 per cent to 101.9 per dollar. That often hurts Japanese stocks but the Tokyo market shrugged off the gains.

The Australian dollar strengthened 0.8 per cent overnight to 94.1 US cents. A stronger Aussie is a key reason why equities down under hit a two-month low this week, but the Fed’s dovish signals outweighed currency concerns on Thursday.

Top gainers include Japanese electronics company Sharp, whose sharer rose 4 per cent after announcing it has the technology to mass produce displays in unconventional shapes. It foresees the technology being used in vehicles, on wearable devices with elliptical displays, and in digital signs.

Shares of Aussie miner BHP Billiton are up 2.5 per cent after the price of iron ore recovered a bit overnight to above $90 (£52.9) per metric tonne.

In New Zealand, fresh data showed the economy expanded by its fastest annual pace in six and a half years in the first quarter, as construction soared.

GDP expanded by 3.8 per cent from a year ago, the fastest pace seen since the third quarter of 2007.

The construction sector expanded by 12.5 per cent, its biggest increase in 14 years, according to Annette Beacher at TD Securities.

“We expect consumption and construction to continue driving growth, while the trade sector may be challenged with the slide in dairy prices and ongoing elevated NZD,” she added.