Asian stocks rise on prospect of gradual interest rate increase

TOKYO - Asian stocks posted broad gains Thursday after the Federal Reserve ended protracted uncertainty in markets by raising interest rates for the first time in nearly a decade and signalling that further increases will be gradual.

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KEEPING SCORE: Japan's Nikkei 225 jumped 2 per cent to 19,424.99 and Hong Kong's Hang Seng rose nearly 1 per cent to 21,906.35. South Korea's Kospi added 0.2 per cent to 1,973.14. Australia's S&P/ASX 200 advanced 1.6 per cent to 5,107.20. China's Shanghai Composite gained 1.5 per cent to 3,567.31. Benchmarks in Taiwan, New Zealand and Southeast Asia also rose. The dollar gained against Asian currencies. It was up 0.5 per cent against the Korean won and gained 0.2 per cent versus the Indian rupee and Indonesia rupiah.

FED, FINALLY: The Federal Reserve raised its main interest rate by a quarter of a point, a move that was widely anticipated in the markets. That rate had been near zero for seven years to foster an economic recovery after the U.S. mortgage crisis that sparked a global recession. The rate hike was a long-expected vote of confidence in the U.S. economy, which is the world's biggest and a crucial market for exporters in trade-reliant Asia. At the same time investors were encouraged that the Fed emphasized that further increases will be gradual.

THE QUOTE: The rate hike "signals confidence in the ongoing recovery in the U.S. economy after the Great Financial Crisis," said Shane Oliver, head of investment strategy at AMP Capital. "Given ongoing deflationary risks and slow global growth, future Fed hikes are likely to be cautious and gradual," he said a report. "Global shares are likely to resume their rising trend but with U.S. shares as a relative underperformer. Bond yields are likely to remain low which should be positive for real assets."

ENERGY: Benchmark U.S. crude was down 10 cents at $35.42 a barrel in electronic trading on the New York Mercantile Exchange. The futures contract dropped $1.83, or 4.9 per cent, to close at $35.52 in New York on Wednesday. Brent crude, a benchmark for international oils, was down 16 cents at $37.23 a barrel in London. It lost $1.26, or 3.3 per cent, to $37.19 in the previous session.

MAJOR CURRENCIES: The euro was little changed at $1.0836 from $1.0884 in the previous trading session. The dollar rose to 122.58 yen from 122.41 yen.


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