Asian stocks lower after Fed report renews bond yield fears

Jerome Powell Chairman of the Federal Reserve

Tech stocks boost Wall St ahead of Fed minutes

The Federal Reserve should focus on lowering interest rates in the face of the next recession, and avoid relying on asset purchases that are a less effective policy tool than previously thought, four top US economists told a roomful of Fed officials on Friday.

The Fed left rates unchanged at the January meeting, but investors will look for its opinion on inflation and interest rates, especially after strong economic data raised concerns of an overheating economy and triggered the recent selloff.

Minutes of the Federal Reserve's latest meeting showed on Wednesday that the policymakers were more confident in the need to keep raising rates, with most believing inflation would perk up. Analysts had on average forecast earnings of $1.99 per share.

It is still down more than 4% in February so far, however, after global equity markets were mauled at the start of the month by the concern that inflation is picking up.

The S&P technology index gained 0.3 as the sole major S&P sector on the plus side, buoyed by a gain of almost 2 per cent in the semiconductor sector.

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Their paper analyzed the efficacy of the US central bank's $3.5-trillion in bond purchases in response to the 2007-2009 financial crisis and recession.

Despite Fed's hawkish views, bets on the US short-term interest rate futures continued to reflect expectations of three rate hikes this year, based on a Reuters analysis.

In the end, the Dow Jones lost 0.7%, the S&P 500 lost 0.6%, the Nasdaq Composite lost 0.2% and the Russell 2000 bucked the trend to gain 0.4%. The Fed had caused a so called "taper tantrum" in May 2013 when it signalled it was time to stop pumping cash into the United States economy, a move that created havoc in financial markets, particularly Asia. The "Goldilocks" era of good growth, low rates, low inflation and an intractable rise in stock and bond prices is officially over.

"Financial market volatility has not dented our constructive view on Asia's growth outlook for this year", said Khoon Goh Singapore-based Head of Research for ANZ.

Shares of Glencore climbed after the mining and commodities trading company reported results it called its "strongest on record" and boosted its dividend payout to investors to US$2.9 billion as it benefitted from higher commodity prices and cost cuts. The dollar edged up and WTI crude slipped ahead of data from the Energy Information Administration in Thursday.

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The dollar sagged broadly on Friday after its recovery this week faded as USA treasury yields declined from their recent peaks.

The euro was little changed at $1.2311 after gaining 0.4% the previous day.

The Nasdaq Composite also gained 0.7 percent to trade at 7,268.93.

Xcerra Corp (NASDAQ:XCRA) was down 1.39% at US$9.57 after the company said it was calling off its US$580mln sale to a Chinese group, blaming difficulty in securing federal approval.

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