Asia stocks climb to 4-month high as dollar struggles

Asia stocks rose to a four-month high on Thursday after the Federal Reserve pledged to be patient with further interest rate hikes, signaling a potential end to its tightening cycle amid signs of slowing global growth.

The dollar struggled near a three-week against its major peers and U.S. Treasury yields were significantly lower as investors reacted to the Fed’s change in tone.

Spread-betters expected European stocks to follow Asia’s lead and open higher, with Britain’s FTSE edging up 0.05 per cent and Germany’s DAX and France’s CAC each climbing 0.3 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest since Oct. 4 and was last up 0.9 per cent. Japan’s Nikkei rose 1 per cent.

The Shanghai Composite Index climbed 0.3 per cent despite data showing China’s factory activity contracted for a second straight month amid weakening orders.

South Korea’s KOSPI added 0.3 per cent.

The Fed on Wednesday held interest rates steady as expected, and also discarded its promises of “further gradual increases” in interest rates.

The central bank said it would be “patient” before making any further moves amid a suddenly cloudy outlook for the U.S. economy due to global growth risks and impasses over trade and government budget negotiations.

On Wall Street, the Dow and the Nasdaq rallied 1.7 per cent and 2.2 per cent, respectively, on hopes the Fed’s pause would give the U.S. economy and corporate profits more room to run.