Asian stock markets up slightly on investor belief that Fed will maintain its stimulus program

BANGKOK – Asian stock markets recovered modestly Tuesday, after negative economic news out of the U.S. was neutralized by the belief among many investors that the U.S. central bank would maintain its stimulus program to help the economy.

Japan’s Nikkei 225 index rose 0.3 per cent to 13,305.72. Australia’s S&P/ASX 200 rose 0.1 per cent to 4,893.90. Hong Kong’s Hang Seng rose 0.1 per cent to 22,312.52. South Korea’s Kospi fell 0.3 per cent to 1,983.21.

A report that showed U.S. manufacturing activity at its lowest level in nearly four years kept Wall Street afloat, oddly enough, by convincing investors that the Federal Reserve would not scale back on its massive bond-buying effort.

Speculation about the Fed’s intentions regarding its program, called quantitative easing or QE, has sent stocks on a rollercoaster ride in recent sessions. The Fed purchases $85 billion a month in bonds and the proceeds eventually translate into bank loans intended to spur borrowing and spending. All that extra cash sloshing around the economy pushes interest rates down, which makes stocks more appealing to investors.

Worries that the good times might end if the Fed pulls the QE plug sent Asian stocks plummeting on Monday. But a weaker-than-anticipated U.S. manufacturing survey released later in the day led investors to believe it is more likely that the Fed would continue with QE, a positive for stocks. Wall Street closed higher.

Figures released Monday suggested the eurozone may be stabilizing somewhat. The monthly manufacturing purchasing managers’ index from financial information provider Markit rose to 48.3 in May from the initial estimate of 47.8 — the upward revision takes the index nearer to the 50 threshold between expansion and contraction.

On Monday in New York, the Dow Jones industrial average closed up 0.9 per cent, at 15,254.03. The Standard & Poor’s 500 index rose 0.6 per cent to 1,640.42. The Nasdaq composite index rose 1 per cent to 3,465.37.

Benchmark oil for July delivery fell 40 cents to $93.06 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.48 to close at $93.45 per barrel on the Nymex on Monday.

In currencies, the euro fell to $1.3061 from $1.3076 late Monday in New York. The dollar rose to 99.59 yen from 99.45 yen.


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