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Asian markets mostly rose Thursday
after the Federal Reserve cut interest rates but investors were left unsure
about its next possible move, with focus now on whether the Bank of Japan
will continue the global central bank easing drive.
While the Fed met expectations with its 25-basis-point reduction, the lack
of strong forward guidance disappointed many, who were also concerned about a
growing split in the policy board between hawks and doves.
Equity traders have spent much of this month in a positive mood, betting
that central banks are taking a more accommodative tone with monetary policy
to support the stuttering global economy.
The European Central Bank unveiled a fresh round of bond-buying stimulus
and another rate cut this month, and there had been hopes the Fed would
indicate a further reduction in borrowing costs this year.
Fed boss Jerome Powell said the board did not expect a recession but trade
uncertainty is creating “cross winds”, hitting business investment and
exports. He added the bank will “will act as appropriate” to maintain
economic growth.
“After raising rates nine times in the past four years, the Fed kicked off
the wave of global central bank easing with their dramatic dovish pivot in
January,” said Tim Foster at Fidelity International.
“But simple rate cuts are now rather old-fashioned compared to the ECB’s
comprehensive and complicated package of easing measures last week.”
– ‘Lack of conviction’ –
And Edward Moya, a senior market analyst at OANDA, said the Fed could
regret its decision to not be more forthright.
Its “lack of conviction in signalling more rate cuts will probably be a
policy mistake that is wasting the effectiveness of the first two rate cuts”,
he said in a note. “The Fed seems set on waiting for a couple geopolitical
risks to rattle the economy before committing to a full-fledged easing
cycle.”
Still, with the BoJ due to end its latest policy meeting later Thursday
shares in Tokyo rose one percent going into the break.
Sydney was up 0.7 percent, Seoul rose 0.6 percent, Singapore added 0.1
percent and Wellington gained 0.3 percent.
But Hong Kong, which has struggled all week under the weight of concerns
about the impact on the economy of long-running, sometimes violent protests
in the city, fell 0.6 percent. Shanghai was flat.
The easing stance taken by central banks comes as traders try to juggle a
series of — mostly negative — issues including the China-US talks, the
slowing economy and fresh geopolitical concerns after the weekend Saudi oil
plant strike.
“In the end, we are keeping a keen eye on trade discussions, on recently
concerning oil dynamics, on market liquidity, on Brexit, on the pace of
slowing employment conditions, and as always on the inflation readings” to
work out when the Fed will cut again, said Rick Rieder, BlackRock’s Chief
Investment Officer of Global Fixed Income.
Oil markets have settled for now — both main contracts were slightly
higher Thursday — after the surge in prices at the start of the week caused
by the Saudi blasts. But traders remain on alert for further developments
including the US and Saudi response, with both putting the blame at Iran’s
door.
The crisis has reignited worries about a military flare-up in the oil-rich
Gulf region, which would send prices soaring and likely hit stock markets.
A warning from European Commission chief Jean-Claude Juncker that the risk
of a no-deal Brexit “remains very real” was putting downward pressure on the
pound, with both sides still unable to come up with a solution to the crucial
“Irish backstop” issue.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.0 percent at 22,183.53 (break)
Hong Kong – Hang Seng: DOWN 0.6 percent at 26,603.21
Shanghai – Composite: FLAT at 2,986.72
West Texas Intermediate: UP 15 cents at $58.26
Brent North Sea crude: UP eight cents at $63.68 per barrel
Euro/dollar: DOWN at $1.1030 from $1.1034 at 2100 GMT
Dollar/yen: DOWN at 108.20 yen from 108.43 yen
Pound/dollar: DOWN at $1.2470 from $1.2481
Euro/pound: UP at 88.45 pence from 88.40 pence
New York – Dow: UP 0.1 percent at 27,147.08 (close)
London – FTSE 100: DOWN 0.1 percent at 7,314.05 (close)
(BSS)
