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Singapore shares close higher after Fed's dovish hints
THE "bad news is good for stocks" mode of investing made its unsurprising return on Thursday as the Straits Times Index (STI) rose 35.96 points to 2,880.17 in response to the US Federal Reserve's Wednesday decision to keep interest rates unchanged and the likelihood that it will only raise rates twice this year instead of four times because of the weakening economic outlook.
Turnover, which on Wednesday sank to its lowest this year, improved to 1.6 billion units worth S$1.2 billion. Excluding warrants, there were 277 rises versus 130 falls.
"The index plunged in January and February because of China and oil worries, and recovered in March because oil bounced and China cut interest rates," remarked an observer. "We're back to where we were before all that drama - which is looking at weakening growth and earnings."
Markets also appear to be happier now with a weak outlook since this means more stimulus from central banks in the form of delayed rate hikes and increased quantitative easing via bond purchases.
Wall Street on Wednesday rose after the Fed's meeting with wire reports attributing this to the Fed's dovish stance. On Thursday, the Dow futures gained about 60 points during local trading hours.
Macquarie Warrants (MW) in its daily newsletter said that according to Bloomberg, this is the first time since the Asian and Russian crises rocked world financial markets in the late 1990s that US monetary policy is as focused on the risks to global growth as it is on the domestic economy.
"Without a timetable for the rate increases, the Fed said the next move would depend on 'realised and expected economic conditions' and reiterated that they plan to move gradually," said MW.