Asian shares saw gains on Thursday's early trading following positive signals from the U.S. Federal Reserve that it will not cut interest rates further next year. Markets took the signal as a sign that the economy is recovering.
According to CNBC, South Korea's Kospi edged by 0.87 percent, Japan's Topix and Nikkei 225 climbed beyond the flatline in previous trading hours. While the Australian S&P/ASX 200 shed around 0.5 percent, the MSCI Asia the ex-Japan index traded higher at 0.19 percent.
The reasonably positive gains in Asian markets were driven primarily by the U.S. central bank's decision to retain interest rates. Analysts already predicted the move but some investors were still uneasy until the Fed's comments emerged.
On the other hand, global markets, particularly in Asia, are also watching developments in the China-U.S. trade war. Some experts expressed divided statements about whether or not "phase one" of the trade deal will be reached before Sunday or not.
A new set of tariffs are scheduled to take effect on Chinese goods on December 15. Should the two economic powers not reach an agreement by then, the tariffs will take effect and markets are expected to shed previous gains.
For the head of Asia investment strategy at JP Morgan Private Bank, Alex Wolf, "an extension" of negotiations is more likely at this point instead of a deal. Wolf also projected that the tariffs will be rolled out.
While uncertainties in the China-U.S. trade dispute ensue, some markets are leaning on the hope that the American economy will not decline. For many investors, the Fed's decision to keep rates unchanged is a good reason to rally.
The Federal Reserve unanimously voted to retain interest rates on Wednesday. Fed Chairman Jerome Powell also announced that their "economic outlook remains favorable despite global developments and ongoing risks," Channel News Asia reported.
Powell noted that solidifying an agreement between China and the U.S. will have a "positive" impact on both economies, as well as the global economy. He said a trade deal will be more effective in easing economic fears than providing markets with developments on the regional free trade agreement (FTA) with Mexico and Canada.
Meanwhile, the Fed is expected to receive comments from the U.S. President Donald Trump after the latest move on retaining interest rates. Trump has been calling for more action from the Fed amid increasing fears over the U.S. economy's decline.
Trump also nudged the Fed to cut rates to zero as a means of boosting the U.S. economy. It remains to be seen whether things will change earlier this year, during the first Fed meeting for 2020.
