Asian shares surged during the early morning trading session on the back of the strong move seen on the Dow Jones Industrial Average during the overnight trading session. The surge in the Dow Jones Industrial Average was on the back of the release of the FOMC minutes which showed that the Federal Reserve would continue to look at economic reports before taking any decision on the interest rates. Most Asian market currencies were higher during the trading session indicative of the strong institutional interest for emerging market equities. It is imperative to state that a hike by the Federal Reserve could be a huge negative for equity markets around the globe.
It was reported that Federal Reserve officials believed last month that the economic conditions needed to trigger the first interest rate hike in close to a decade could “well be met” by their next meeting in December. The FOMC minutes which are closely watched by investors and analysts on the street, revealed that it believes the job market would improve further and inflation could start moving towards their 2 percent annual target. The Federal Reserve officials said that global threats had diminished. It is imperative to state that the Federal Reserve has kept its benchmark for short term rates near zero since late 2008. Many analysts believe that an interest rate hike could be a near term negative for emerging market equities but would continue to remain a positive in the longer term as it would pave the way for deleveraging of the Federal Reserve balance sheet.
It was also reported today that the Bank of Japan kept its policy on hold with regards to its bond buying program but continued to maintain that the Bank of Japan was prepared to increase the size of its bond buying program if need be.