Asia: Stocks extend global rally on US rate optimism but STI drops 0.9%

[SYDNEY] Asian stocks rose on Thursday, with the regional benchmark index heading for biggest monthly gain since May 2009, amid optimism the Federal Reserve is in no hurry to lift interest rates. Material and consumer-discretionary shares led the advance.

The MSCI Asia Pacific Index climbed 0.5 per cent to 129.48 as of 9:04 am in Tokyo. The gauge is up 8.6 per cent for the month and down 1.9 per cent this quarter. Japan's Topix index added 0.5 per cent to pare its loss this year to 12 per cent. Australia's S&P/ASX 200 Index added 1.5 per cent.

New Zealand's NZX 50 Index gained 0.3 per cent.

South Korea's Kospi index rose 0.2 per cent.

But Singapore's Straits Times Index fell 0.86 per cent to 2,847.95 as of 9:18am.

A tumultuous period for global markets since the start of the year initially focused on Chinese growth concerns and the tumbling price of oil. The selloff then spread to banking shares amid concern over negative interest rates. Equities have since rebounded after the Federal Reserve reassured investors it won't rush to increase borrowing costs.

"A lot of the recent rebound has been down to the Fed back-tracking on rate hikes," said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about US$7.2 billion.

"We've seen a big rally but there are still some genuine worries out there. Markets had been overpricing some of the risks, whereas now they're probably underpricing them."

While private American jobs data came in better than analysts expected, Fed Chair Janet Yellen's dovish message from Tuesday continued to reverberate. Chicago Fed President Charles Evans signaled the central bank would tolerate above-target inflation for a "brief period" amid threats to American expansion from a slowing global economy. Futures now show no chance of the Fed altering monetary policy next month and only 45 per cent odds of a rate increase by November.

Policy makers have emphasized that progress in economic data will steer their rate decisions. A report on Wednesday showed companies in the US added 200,000 workers to their payrolls in March, slightly above the forecast of economists surveyed by Bloomberg. The government's monthly jobs report due Friday is predicted to show a 205,000 gain with the unemployment rate holding at 4.9 per cent. A measure of manufacturing activity is also due on Friday.

Futures on Hong Kong's Hang Seng Index advanced 0.4 per cent in most recent trading, while contracts on the Hang Seng China Enterprises Index climbed 0.2 per cent.

Futures on the Standard & Poor's 500 Index were down less than 0.1 per cent following a 0.4 per cent advance in the US benchmark gauge on Wednesday as it closed at the highest since Dec 29.

BLOOMBERG