Asian stock markets rose Tuesday after comments by Federal Reserve chief Ben Bernanke suggested he thinks more needs to be done to help spur the U.S. economy.
Benchmark oil fell below $107 per barrel. The dollar dropped against the euro but held steady against the yen.
Japan’s Nikkei 225 index jumped 2 per cent to 10,218.01, after hitting 10,225.11, its highest intraday level in more than a year.
South Korea’s Kospi rose 0.8 per cent to 2,035.94 with heavy industrial shares helping to push the benchmark higher. Hong Kong’s Hang Seng climbed 1.4 per cent to 20,969.02 and Australia’s S&P/ASX 200 added 0.8 per cent to 4,297.20.
Bernanke told an audience at the National Association for Business Economics that the U.S. job market was still weak despite recent signs of improvement. That could mean he believes the Fed needs to continue to prop up the economy by keeping short-term interest rates near zero and perhaps by buying more bonds later.
The Fed has embarked on two previous rounds of bond-buying, most recently in late 2010, known as quantitative easing. The idea is to drive down long-term interest rates and encourage investors to buy stocks. The second round ignited a 28 per cent Wall Street rally in eight months.
The mere thought that a third round of bond-buying, dubbed QE3 by industry insiders, might be possible was all it took for markets to respond.
“Bernanke said that the Fed has to maintain the regime of loose monetary policy, and the market interpreted this as a chance for QE3,” said Francis Lun, managing director of Lyncean Holdings in Hong Kong. “That’s why the stock markets rallied,” he said, referring to Wall Street. “And that carried over to Asia.”
The dollar weakened against most major currencies since traders interpreted Bernanke’s comments to mean that interest rates will remain near zero. Lower rates tend to weigh on a currency by reducing the returns investors get from holding it.
That helped support prices for commodities since they are traded in dollars and considered more of a bargain for investors who hold other currencies such as the euro.
Chinese industrial and precious metals shares rose. Hong Kong-listed Jiangxi Copper Co. jumped 3.4 percent. Aluminum Corp. of China soared 4.1 per cent.
Japanese exporters got a boost from the yen’s recent fall against the euro and the dollar. Nikon Corp. rose 3 per cent while Sony Corp. added 2 per cent. Honda Motor Corp. rose 2.9 per cent.
Sentiment was also boosted by speculation that Germany would be willing to agree to an increase in Europe’s bailout fund to 700 billion ($930 billion). Germany has to date resisted calls to increase the lending capacity of the fund beyond the planned 500 billion despite uncertainty over the ability of Rome and Madrid to repay their debts.
On Monday, the Dow Jones industrial average climbed 160.90 points to 13,241.63, its third-best showing this year. The Standard & Poor’s 500 index rose 19.40 points to 1,416.51, its highest close since May 2008.
The Nasdaq composite index climbed 54.65 points to 3,122.57, its best finish since November 2000.
Benchmark oil for May delivery was up 3 cents to $107.06 in electronic trading on the New York Mercantile Exchange. The contract up 16 cents to settle at $107.03 per barrel in New York on Monday.
In currency trading, the euro rose to $1.3353 from $1.3343 late Monday in New York. The dollar was little changed at 82.85 yen.
