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Shares in Asia gain as easy policy views fuel sentiment

Published 10/15/2015, 10:09 PM
Updated 10/15/2015, 10:11 PM
© Reuters.  Asian markets gain on easy policy views
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Investing.com - Shares in Sydney rose along with Tokyo and Shanghai in early Asia on Friday on expectations of easy monetary policies even as sentiment on growth outlooks for key markets wanes.

The Nikkei 225 rose 1.31%, while the S&P/ASX 200 gained 0.97%. The Shanghai Composite gained 0.83%

The Reserve Bank of Australia said the economic growth outlook for China and emerging economies has deteriorated while domestic conditions in housing pose higher risks in its Financial Stability Review released on Friday.

"The focus of global financial stability has been shifting to emerging-market economies and their potential to contribute to destabilizing adjustments in financial markets," the RBA said. The growth outlook for China and other emerging-market economies has deteriorated.

"In addition lower commodity prices, fiscal pressure and political instability are compounding the situation in some cases," the RBA said.

Overnight, U.S. stocks closed broadly higher, amid soft consumer inflation data and gains from two prominent Wall Street banks after the release of the third quarter earnings on Thursday.

Dragged down by plunging energy prices, the U.S. Bureau of Labor Statistics said the Consumer Price Index for September fell mildly from its level in August, while prices remained nearly identical to its level from 12 months ago. The weak inflation data provides the hawks at the Federal Reserve with little ammunition in their arguments to raise interest rates later this month, or perhaps even in December.

The Dow Jones Industrial Average and the NASDAQ Composite index each gained more than 1% on Thursday, to end a two-day skid. The Dow rose 217.00 or 1.28% to 17,141.75, moving back above 17,000 after briefly dropping below the level one session earlier. For the entire month of September, the Dow traded below the 17,000 threshold. The NASDAQ also gained 87.25 or 1.82% to close at 4,870.10, amid a surge among biotech stocks.

The S&P 500 Composite index, meanwhile, added 29.62 or 1.49% to 2,023.86, as all 10 of its sectors closed in the green. Stocks in the Health Care, Financials and Energy industries led, each gaining more than 1.5% on the session.

On Thursday morning, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index fell by 0.2% for the month of September, in line with consensus estimates. A month earlier, the reading fell by 0.1% in August. On a year-over-year basis, the headline reading is identical to its level 12 months ago.

There were signals throughout the report of weakness in the energy sector, restraining inflationary pressures overall. For the month, energy prices declined by 4.7%, while gasoline prices plummeted by 9.0% in September. The dip in energy prices pulled down transportation costs, which fell by 2.3% on the month.

The effects were reflected in the modest gains in Core CPI Inflation, which strips out food and energy prices. On a monthly basis, Core CPI rose by 0.2% from its level in August, while increasing 1.9% over the last year. Still, Core PCE Inflation, the Fed's preferred gauge for long-term inflation remains under 1.5%. The Fed would like to see long-term inflation move toward its targeted goal 2% before it raises its benchmark Federal Funds Rate.

Last month at an appearance at the University of Massachusetts-Amherst, Fed chair Janet Yellen indicated that the FOMC could raise short-term interest rates this year barring unforeseen developments over the next several weeks. Yellen also noted that the inflation shortfall is likely to be transitory, as one-off factors such as lower energy prices and weaker imports due to a stronger dollar abate. Yellen added that inflation should reach the Fed's 2% target when the labor market returns to full employment. Long-term inflation has remained under the Fed's goal for every month over the last three years.

The FOMC is expected to take a "data-driven approach," in determining whether it should wait until 2016 for lift-off. A rate hike is viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.

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