BANGKOK Expectations that the Federal Reserve will announce a new stimulus plan to help bring life to a lethargic U.S. economy boosted Asian stock markets Wednesday. Investors brushed off North Korea's latest test launch of a long-range rocket.
The Fed is widely expected to announce a new bond-buying program known as quantitative easing at the end of its two-day policy meeting that began Tuesday. That's because one Fed program that's intended to keep long-term borrowing rates down will expire at year's end.
Under the program, called Operation Twist, the Fed has been selling short-term securities and using the proceeds to buy longer-term securities in an effort to push down interest rates.
"There is some expectation" that the Fed will act, said Linus Yip, strategist at First Shanghai Securities in Hong Kong. "If that's not the case, there may be a market pullback."
The Fed has launched three rounds of quantitative easing since the financial crisis hit. The latest round began in September. Under it, the Fed is buying $40 billion in mortgage bonds each month.
Japan, meanwhile, protested North Korea's launch of a rocket and was convening its security council to analyze the situation. Rocket tests are seen as crucial to advancing North Korea's nuclear weapons ambitions. Officials in Washington, Seoul, Tokyo and elsewhere have been urging North Korea to cancel the liftoff.
Despite the launch, Japan's Nikkei 225 index rose 0.7 percent to 9,590. Hong Kong's Hang Seng added 0.5 percent to 22,433.59. South Korea's Kospi gained 0.3 percent to 1,969.99. Australia's S&P/ASX 200 added 0.2 percent to 4,587.20.
Investors were also encouraged by a German business confidence survey released Tuesday, which alleviated concerns that Europe's largest economy might fall into recession.
The ZEW indicator of economic sentiment defied expectations by rising to plus 6.9 points, from minus 15.7 in November. Markets had expected the index to remain mired in negative numbers. Germany's economy grew a modest 0.2 percent in the third quarter and expectations are for another weak quarter in the last three months of the year.
Wolfgang Franz, head of the ZEW, or Centre for European Economic Research, said the survey showed that Germany isn't facing recession unless the debt crisis afflicting euro countries reignites.
Among individual stocks, shares of Australian mining giant BHP Billiton rose 1.2 percent after the company announced it has agreed to sell its stake in a proposed Australian gas project to Chinese state-owned energy producer PetroChina for $1.6 billion.
In Hong Kong, retailer Emperor Watch & Jewellry rose 2.1 percent as investors scooped up shares in anticipation of strong Christmas sales.
Wall Street stocks rose Tuesday as investors hoped U.S. leaders would eventually thrash out a budget deal needed to keep a slew of tax increases and spending cuts from hitting the world's largest economy. The longer a U.S. deal fails to emerge to avoid the so-called "fiscal cliff" of automatic tax increases and spending cuts at the start of next year, the more fidgety investors are likely to become.
The Dow Jones industrial average rose 0.6 percent to 13,248.44. The S&P 500 gained 0.7 percent to 1,427.84. The Nasdaq composite index rose 1.2 percent to 3,022.30
Benchmark crude for January delivery was up 7 cents to $85.86 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 23 cents to close at $85.79 per barrel on the Nymex on Tuesday.
In currencies, the euro fell to $1.2999 from $1.3003 late Tuesday in New York. The dollar rose to 82.58 yen from 82.50 yen.