Asian markets traded mixed in mid-morning trade on Thursday, as Japan’s Nikkei and India’s BSE Sensex surged, tracking overnight gains in Wall Street and Europe, following Chairman Ben Bernanke's comments on the future of the U.S. Federal Reserve's massive asset-purchase program, while markets in China fell on worries over Beijing's reluctance to stimulate a slowing economy.
Japan’s Nikkei rallied 1.20 percent and Australia’s S&P/ASX 200 rose 0.21 percent, while India’s BSE Sensex was trading up 0.15 percent on Thursday. However, in China, the Shanghai Composite index was trading down 0.73 percent and Hong Kong’s Hang Seng Index was flat while South Korea’s KOSPI Composite index was down 0.61 percent.
Chinese shares plunged sharply in morning trade after Finance Minister Lou Jiwei said Wednesday that Beijing was unlikely to introduce monetary stimulus despite a continuing slowdown in the world's second-largest economy.
Bernanke, at his congressional testimony on Wednesday, sought to assure markets that the Fed’s $85 billion-a-month bond-buying program “is by no means on a preset course." The Fed chairman reiterated his earlier comments to say that the Fed's “asset purchases depend on economic and financial developments” and they could either be tapered or boosted depending on the economic data.
Although his comments on continuing the easy monetary policy for the foreseeable future soothed investors' concerns, sending stocks up in U.S. and Europe on Wednesday, analysts feel that the uncertainty on the course of monetary policy could continue to jolt the markets, depending on the status of economic indicators.
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“The timing will be determined by the incoming data, which even the Fed Chairman does not know in advance,” Market Economics wrote in a note to investors, adding that, “Fed will start to taper its asset purchases later this year (we continue to favor the September meeting over December) and halt them completely around mid-2014. So while the timetable for tapering QE3 may not be preset, it remains on track for now.”
However, the report added that markets were right in translating Bernanke’s comments as dovish, given the disappointing scale of economic expansion in the U.S. in the second quarter.
“The trajectory of the third quarter isn’t phenomenal,” Michael Feroli, chief U.S. economist for JPMorgan Chase & Co., said, according to Bloomberg News. “What I take from Bernanke’s remarks is the message that they aren’t totally confident. The odds of a September taper got nudged down a little.”
Bernanke will continue his testimony on Thursday at 10:30 a.m. EDT before the Senate Banking Committee.
U.S. stocks closed slightly up as investor sentiment was also buoyed by better-than-expected quarterly earnings reports from Wall Street majors such as Bank of America Corp. (NYSE: BAC), while the yield on the 10-year US Treasury bond fell 4 basis points to 2.49 percent in evening trade on Wednesday.
Earlier on Wednesday, in Europe, UK’s FTSE 100 index closed up 0.2 per cent while Germany’s DAX gained 0.7 percent, while the CAC-40 in France ended 0.6 percent higher.