HONG KONG (Reuters) – Asian shares extended gains on Thursday after the Federal Reserve said it was too early to consider rolling back emergency support for the economy, and U.S. President Joe Biden proposed an $1.8 trillion stimulus package.
Biden proposed the sweeping new $1.8 trillion plan in a speech to a joint session of Congress on Wednesday, pleading with Republican lawmakers to work with him on divisive issues and to meet the stiff competition posed by China.
He also made an impassioned plea to raise taxes on corporations and rich Americans to help pay for what he called the “American Families Plan” in his maiden speech to Congress. He has also proposed nearly doubling the tax on investment income, which knocked stock markets last week.
Stephen Dover (NYSE:DOV), Franklin Templeton’s chief market strategist in California, said the effect of the tax package on markets is hard to measure for now.
“If it passes, I think it will have an impact on individual stocks that will pay a higher rate of tax or companies with founders that will pay capital gains and could sell stocks,” he said. “I think investors are going to think about whether they want take their gains now and that creates the possibility of short-term volatility now.”
MSCI’s broadest index of Asia-Pacific shares outside Japan built on early gains and was up 0.46% by mid-afternoon.
Australia’s S&P/ASX 200 edged up 0.24%, as strong oil prices lifted energy stocks.
Markets in Japan were closed for a holiday but Nikkei futures rose 0.35% to 29,055 points.
For the rest of the day, investors will focus on the first estimate of U.S. GDP for the first quarter, which is expected at 13:30 GMT.
Fed Chair Jerome Powell said on Wednesday that “it is not time yet” to begin discussing any change in policy after the U.S. central bank left interest rates and its bond-buying programme unchanged, despite taking a more optimistic view of the country’s economic recovery.
Excerpts of Biden’s speech released in advance by the White House “hit the high points – big infra(structure) spend, talking climate action and vaccines,” said John Milroy, investment adviser at Ord Minnett. “The Fed remains dovish, all very supportive.”
Tech shares got a boost after Apple Inc (NASDAQ:AAPL) on Wednesday posted sales and profits ahead of Wall Street expectations, though it warned a global chip shortage could dent iPad and Mac sales by several billion dollars.
Wall Street ended lower on Wednesday. The Dow Jones Industrial Average fell 0.48% to end at 33,820.38 points, while the S&P 500 lost 0.08% to 4,183.18.
The dollar pared up early losses against the yen to 108.61 and the euro gained 0.07% to 1.2132 following the Fed’s decision to maintain supportive policies.
Oil prices extended gains on Thursday after rising 1% in the previous session as bullish forecasts for a demand recovery this summer offset concerns of rising COVID-19 cases in India, Japan and Brazil.
Brent crude for June rose 0.27% to $67.45 a barrel, while U.S. West Texas Intermediate crude for June was at $64.02 a barrel, up 0.25%.
Spot gold added 0.14% to $1,783.85 an ounce.