The Federal Reserve reaffirmed its support for the US economy, but boss Jerome Powell said fresh government help was needed to help it through the virus crisis

Hong Kong (AFP) - Equities were mixed Thursday after the Federal Reserve pledged to provide as much support as necessary for the US economy, with early gains reversed by fears a fresh wave of virus infections could push the global recovery off track.

While the central bank did not unveil any new measures and broadly met expectations, analysts said it instilled some much-needed confidence that the Fed had their back.

Bank boss Jerome Powell said the Fed had noted the spike in new US cases was denting economic activity and warned the downturn was “the most severe of our lifetimes”, while adding recovery depended on staunching the virus so Americans could go out and spend again.

The policy board repeated its intention to hold rates near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”.

Observers said focus now turns to the next policy meeting in September, which could see more measures unveiled.

That was enough to give a boost to equities, which have struggled in recent weeks on concerns about the spread of coronavirus around the world and containment measures that have been re-introduced in some countries.

Wall Street’s three main indexes saw healthy gains which were followed by Asia in the morning, but the advance fizzled as the day wore on.

Hong Kong and Tokyo slipped 0.3 percent, Shanghai shed 0.2 percent and Singapore shed more than two percent – owing to a sharp drop in banks after the country’s regulator called on them to cap dividend payments.

Manila and Bangkok were also down.

But Sydney and Mumbai added 0.7 percent, while Taipei put on more than one percent and Jakarta and Wellington were also higher.

London was flat at the open, while Paris and Frankfurt slipped.

- Washington struggles -

“It wasn’t exactly the most riveting (policy meeting) of recent times after the Fed let the cat out of the bag late Tuesday pledging to extend its emergency programmes,” said Stephen Innes at AxiCorp.

But the meeting “still managed to dot I’s and cross the T’s and out-dove even the market’s most dovish expectations”, he added.

“Investors liked what they heard from Chair Powell. This is a Fed that appears to feel the pulse of the economy, even despite the meeting coming in line with expectations and offering no new policy announcements.”

But, while traders have a mountain of cash from governments and central banks around the world backing them up, the disease continues to dominate as the US death toll topped 150,000 and Australia’s state of Victoria noted a record number of new infections.

The grim readings highlight the overriding need for a vaccine.

There is also worry Powell’s calls for more government aid to help the economy might not be heeded by US lawmakers, who remain poles apart as they try to hammer out a new stimulus.

Republicans are divided over their own $1 trillion proposal, while Democrats – whose plan is three times bigger – have resisted moves for a piecemeal package suggested by President Donald Trump.

White House Chief of Staff Mark Meadows said the two sides were “nowhere close to a deal”.

The prospect of US interest rates being kept at zero for an extended amount of time put further pressure on the dollar. It hit a two-year low against the euro, but managed to claw back slightly in Asian business.

Analysts, however, say it could face further selling later in the day if US economic growth comes in worse than the 35 percent contraction forecast for the second quarter.

Gold is also tipped to test the $2,000 mark.

- Key figures around 0720 GMT -

Tokyo - Nikkei 225: DOWN 0.3 percent at 22,339.23 (close)

Hong Kong - Hang Seng: DOWN 0.2 percent at 24,829.02

Shanghai - Composite: DOWN 0.2 percent at 3,286.82 (close)

London - FTSE 100: FLAT at 6,130.23

Euro/dollar: DOWN at $1.1753 from $1.1794 at 2100 GMT

Dollar/yen: UP at 105.24 yen from 104.93 yen

Pound/dollar: DOWN at $1.2950 from $1.2993

Euro/pound: DOWN at 90.74 pence from 90.76 pence

West Texas Intermediate: DOWN 0.4 percent at $41.10 per barrel

Brent North Sea crude: DOWN 0.3 percent at $43.60 per barrel

New York - Dow: UP 0.6 percent at 26,539.57 (close)