HONG KONG: Asian markets edged up Tuesday following another record on Wall Street with optimism over the recovery outlook for now trumping long-running inflation fears, with predictions for even more gains to come.
Traders have been in buoyant mood since the Fed last week unveiled its plan for withdrawing its vast financial support but said it would move cautiously in raising interest rates, while analysts said other central banks had been less keen to tighten policy than investors had expected.
Still, the Fed on Monday warned in a closely watched report that the rally across markets could quickly reverse if there was another Covid surge or the recovery stalls, while it also raised concerns about the possible impact of China's property crisis.
All three main indexes in New York hit record highs for a second day in a row helped by news that US lawmakers had passed President Joe Biden's $1.2 trillion infrastructure overhaul and as the country reopened to vaccinated visitors from more than 30 countries.
That all comes on top of a strong earnings season and after Pfizer's announcement that a pill to treat Covid had proved to be hugely effective, putting the world another step closer to overcoming the disease.
And markets analyst Louis Navellier said he was very upbeat about the outlook.
"I think that at the end of January, we're going to be 18 percent to 20 percent higher than we are today," he said in a note. "That's a bold statement. But we've got a lot of earnings coming out, seasonal strength and an accommodative Fed."
Asia, which struggled Monday, managed to follow Wall Street's lead in early trade. Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Wellington, Taipei, Manila and Jakarta all rose.
Still, the spectre of inflation continues to loom large, with prices at multi-year highs owing to supply chain snarls, surging energy costs and a pick-up in demand as the economy returns to normal.
While the Fed has said it will be careful in hiking borrowing costs, Vic Chair Richard Clarida said the economy could be ready for a lift by the end of 2022.
"While we are clearly a ways away from considering raising interest rates," he said he believed the "necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022."
However, other top Fed officials took a more doveish view on the outlook and the timing of a rate liftoff.
"So, the conclusion is that just like the market, Fed officials are not a hundred percent sure how inflation dynamics will play out," said Rodrigo Catril at National Australia Bank.
"If price pressures remain elevated, then next year the Fed will be forced to lean against them even if the maximum employment has not yet been reached."
Eyes are now on the release of US inflation data on Tuesday and Wednesday for a fresh idea about the bank's plans.
Bitcoin surged to a new record of $67,804 as the combined value of all cryptocurrencies topped $3 trillion, according to data provider CoinGecko.
Key figures around 0230 GMT
Tokyo - Nikkei 225: UP 0.1 percent at 29,536.17 (break)
Hong Kong - Hang Seng Index: UP 0.2 percent at 24,822.34
Shanghai - Composite: UP 0.1 percent at 3,501.10
Dollar/yen: DOWN at 113.02 from 113.22 yen at 2145 GMT
Euro/dollar: DOWN at $1.1584 from $1.1587
Euro/pound: UP at 85.42 pence from 85.40 pence
West Texas Intermediate: UP 0.1 percent at $82.00 per barrel
Brent North Sea crude: UP 0.1 percent at $83.49 per barrel
New York - Dow: UP 0.3 percent at 36,432.22 (close)
London - FTSE 100: DOWN 0.5 percent at 7,300.40 (close)
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