Asia: Stocks rally as Fed minutes hint at December hike

Asian equity markets rallied on Thursday after the Federal Reserve’s meeting minutes pointed firmly towards an interest rates hike next month.

Released on Wednesday night, the minutes from the latest Fed meeting indicated the US central bank is set to raise short term interest rates for the first time in almost a decade in a major vote of confidence for the health of the world’s largest economy.

The release of the minutes seemed to dissipate some of the uncertainty that had led to volatility in worldwide markets in recent months. As a result, Asian stocks advanced across the region, with China’s Shanghai Composite Index gaining 1.36%, while Hong Kong’s Hang Seng Index rose 1.41%, South Korea’s Kospi advanced 1.33% and Australia’s S&P/ASX 200 surged 2.13%.

Japan’s Nikkei Stock Average gained 1.07%, driven higher by solid gains in the financial sector as the Bank of Japan left its policy unchanged and said the economy "has continued to recover moderately".

Banks, which would benefit from higher interest rates because of a bigger margin between what they pay for deposits and what they can charge on loans, were on the front foot in Asia’s second largest economy.

Mizuho Financial Group, Nomura Holdings and Mitsubishi UFJ Financial Group gained 0.15%, 0.64% and 1% respectively.

There was less positive news for Japan on the macroeconomic front, as data released earlier in the session showed exports declined 2.1% year-on-year in October, registering their first fall in over a year as weak demand from China and other Asian countries was offsetting the benefit of a weakening yen.

Exports rose 0.5% from the corresponding period in 2014, while the BoJ left its policy unchanged as largely expected. The BoJ voted in favour of maintaining an annual asset purchase target of 80trnyen.

On the currency front, the yen fell to its weakest level since late August against the dollar before recouping some of the losses to trade 0.42% higher against the greenback as of 1122 GMT, while the Australian dollar surged 0.88% against its US counterpart.