HONG KONG/TOKYO — Asian shares rallied on Tuesday as news of further monetary and fiscal stimulus overshadowed fears of a second wave of the coronavirus in China and elsewhere.
The rally in Asia came after U.S. equities reversed early losses on Monday after the Federal Reserve unveiled plans to buy corporate bonds. The Bank of Japan said it expected to pump 110 trillion yen ($1.02 trillion) into the economy higher than the previous estimate of 75 trillion yen and Bloomberg reported the Trump administration was preparing a nearly $1 trillion infrastructure plan.
Rising investor risk appetite buoyed U.S. and European equity futures, sent bond yields higher and reined in the dollar.
“If there was ever a doubt about the benevolence of central banks or governments around the world to cover Main Street’s back, put that fear to rest,” said Stephen Innes, chief global markets strategist at AxiCorp. “The policy taps are getting turned up.”
Japan’s Nikkei Stock Average closed 4.9% higher, logging its biggest daily gain since March 25. All 225 company shares in the index rose with SoftBank Group up 2.7% and Fast Retailing, operator of casual clothing stores Uniqlo, up 3.6%.
The Nikkei index ended its three-day losing streak — the benchmark had declined more than 1,500 points in the past three days– and has recovered about 65% from its bottom on Monday.
Australia’s S&P/ASX 200 gained 3.9 per cent. Hong Kong’s Hang Seng climbed 2.5% while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was up 1.5%.
In South Korea, trading was briefly suspended after the Kospi 200 futures surged 5%. The Kospi index was up 5.3%.
Overnight, US stocks rebounded after the Fed detailed plans, which were first unveiled three months ago, to buy the debt of US companies to reduce the borrowing cost for U.S. businesses. And support the economic recovery. The S&P 500 closed 0.8 per cent higher.
Fed chair Jerome Powell is scheduled to deliver the central bank’s semi-annual monetary policy report to Congress on Tuesday.
“The S&P 500 has bounced off support because of the Fed,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney. “The markets will continue to go higher as long as economies continue to reopen and as long as the number of coronavirus cases is not large enough to stop the reopening.”
Global cases have surpassed 8 million, according to the Johns Hopkins University in the U.S., as infections surge in Latin America, and with the U.S. and China grappling with their own outbreaks.
Beijing is seeing a surge in cases with the cumulative number of infections in the city’s current outbreak exceeding 100. Authorities have imposed more restrictions to keep the virus from spreading to other provinces, banning outbound travel of high-risk people and suspending some transportation services out of the city.