Stocks got a bump higher in afternoon trading after the Federal Reserve indicated that it could leave interest rates alone in the coming months, taking a pause from its credit-tightening program. JPMorgan strategists still expect the central bank to resume tightening after mid-2019, but recommend that investors unwind their bets for the U.S. five- to 30-year yield curve to flatten.
The Fed will issue Wednesday a policy statement outlining its views on the state of the economy and likely announcing that it will leave its benchmark rate unchanged.
MSCI's broadest index of Asia-Pacific shares then rose to its highest since October helped by a 1 percent jump on Japan's Nikkei which shrugged off the normal headwind of a higher yen.
The results helped Wall Street reverse two down days that was triggered by profit warnings from USA bellwethers that signaled a bigger impact from a slowdown in China.
The Fed said it could adjust the pace of the sell-off if the economy deteriorates.
The committee said it will continue to run monetary policy in an ample-reserve regime, where control over short-term interest rates "is exercised primarily through the setting of the Federal Reserve's administered rates".
The 10-0 vote on the decision held the target range for the federal funds rate at 2.25 percent to 2.5 percent. On Wednesday, the statement said "market-based measures of inflation compensation have moved lower in recent months".
"We are now facing a somewhat contradictory picture of generally strong USA macroeconomic performance, alongside growing evidence of cross-currents", Powell told reporters.
Meanwhile, Chinese negotiators are meeting US counterparts in Washington for talks to resolve the ongoing trade dispute.
Powell also said that financial conditions - stock prices and borrowing rates, for example - had become less friendly to growth. It expects the Fed to hike just one more time, instead of twice, and this would be the last for this cycle.
"As long as the USA economy continues to grow and corporate profits climb, I expect cyclical sectors aligned with the economy's growth continue to lead the bull market higher in the near term", said State Street's Arone.