Asian Stocks End Higher; Nikkei Gains 2.2%

By Stephen Wright

BANGKOK -- Asian stocks rose Thursday after the U.S. Federal Reserve said the world's largest economy is shrinking at a slower pace and scotched fears of an inflation threat, underpinning investor hopes for recovery.

Benchmarks in Japan and Hong Kong gained 2% or more in the wake of the U.S. central bank's much anticipated policy statement but trading volume was thin, reflecting doubts that the massive rally in global markets since March can be sustained.

Investors also took heart from figures showing that new orders for durable goods like household appliances rose 1.8% for the second straight month in May -- three times more than anticipated -- with strength seen across all major industries.

The Fed left its main lending rate unchanged at between zero and a quarter percent, as expected, and said the pace of contraction in the U.S. economy appears to be slowing.

It also said price increases will "remain subdued for some time," providing an antidote to fears that government stimulus spending and unprecedented injections of liquidity into the financial system will spark inflation that chokes off any recovery by requiring higher interest rates.

Japan's Nikkei 225 stock average rose 2.2% to end at 9,796.08, while Hong Kong's Hang Seng gained 2.1%.

Wall Street closed mixed Wednesday. The Dow Jones Industrial Average fell 23.05, or 0.3%, to 8,299.86, while the S&P 500 index rose 5.84, or 0.7%, to 900.94. The tech-heavy Nasdaq composite index rose 1.6% to 1,792.34.

U.S. stock index futures were higher, suggesting Wall Street would open with gains Thursday.

Stock in Europe were mixed.

Oil prices rose modestly to just above $69 a barrel in Asia amid mixed signals about crude demand from a weekly U.S. inventory report. Benchmark crude for August delivery was up 39 cents to $69.06 a barrel.

In currencies, the dollar rose to 96.14 yen from 95.67 yen late Wednesday and the euro gained to $1.3967 from $1.3943.