World stocks mostly higher ahead of Fed statement

AP and AFP

KUALA LUMPUR/HONG KONG — World stock markets were mostly higher Wednesday, buoyed by hopes that the Federal Reserve will not speed up plans to raise interest rates. A rally on Wall Street increased buying incentives, as well as a feeling that the Fed would fail to announce a significant policy shift.

France’s CAC-40 was up 0.4 percent at 4,425.75 and Germany’s DAX added 0.3 percent to 9,665.27. Britain’s FTSE 100 rose 0.1 percent to 6,798.69.

Some investors are hoping that the statement from the Fed meeting that ends Wednesday will maintain the phrase “considerable time” to remain in its plan to raise interest rates. Some analysts said the recent rally in the U.S. dollar, which may dampen some areas of the U.S. economy, has become a reason for the Fed to turn cautious. The Fed has held the rate close to zero for more than five years, and stocks have surged against that backdrop.

Asian markets mostly rose Wednesday, with Hong Kong and Shanghai boosted by a report that China’s central bank had pumped US$81 billion into the country’s five biggest lenders, while traders also awaited a U.S. Federal Reserve policy decision. Shanghai ended 0.49 percent, or 11.34 points, higher at 2,307.89, Hong Kong jumped 1.00 percent, or 240.40 points, to 24,376.41 and Seoul rose 0.96, or 19.69 points, to close at 2,062.61. However, Tokyo gave up early gains to finish 0.14 percent lower, dipping 22.86 points to 15,888.67, while Sydney closed down 0.70 percent, or 38.1 points, at 5,407.3. A report on web portal Sina said the People’s Bank of China would inject 500 billion yuan (US$81 billion) into the five top state-owned banks, with a view to boosting lending to businesses. The move would be a major stimulus injection following a string of weak data — including on trade and industrial output — that has raised questions about the state of the world’s number two economy. The injection, a three-month low-interest rate loan, is similar to a 0.5 percentage point cut to the ratio of cash China’s entire banking system must keep in reserve, according to Dow Jones Newswires. The news boosted U.S. shares Tuesday, with the Dow up 0.59 percent, the S&P 500 gaining 0.75 percent and the Nasdaq also adding 0.75 percent. The pick-up in New York was helped by receding expectations the Fed would adopt a more hawkish tone at the meeting ending Wednesday. Investors globally have been pulling their cash off the table recently on speculation the bank will bring forward its timetable for raising interest rates as the economy picks up speed. An increase could hit Asian equities and currencies by making them vulnerable to a sell-off, as the incentive for investors to seek higher yields in regional markets is reduced. However, there are still concerns about the U.S. economy among many investors, with some suggesting the bank will stick to its cautious approach. Gold was at US$1,237.41 an ounce, against US$1,241.18 an ounce late Monday.