Fed holds but hawkish guidance weighs on Asian stocks

Fed holds but hawkish guidance weighs on Asian stocks


Friday 05.30 GMT

What you need to know

  • Asia-Pacific equities lower after Fed holds rates
  • Energy stocks drop after oil price falls
  • Dollar holds on to gains after Thursday rally

Overview

Stocks in Asia were broadly lower on Friday after the Federal Reserve held rates on Thursday, with a dollar rally cooling off in morning trading. Oil prices were steadying after two days of falls that dragged down energy stocks in the region.

Hot topic

Stocks fell in Asia Pacific trading following a disappointing session on Wall Street on Thursday as the Federal Reserve stayed on course for further increases in short-term interest rates.

The Hang Seng was among the region’s worst performing benchmarks, dropping 2.2 per cent as energy stocks tumbled 2.8 per cent on the back of oil price falls overnight and a drop of 4.1 per cent for the technology segment. In China the CSI 300 index of Shanghai and Shenzhen-listed stocks fell 1.2 per cent.

Tokyo’s Topix fell 0.4 per cent as a 0.2 per cent gain for financials failed to offset a 4.4 per cent dip by energy stocks. In Sydney the S&P/ASX 200 fell 0.1 per cent with the energy segment falling 1 per cent.

Those moves came after the S&P 500 index dipped 0.2 per cent on Thursday as the Federal Reserve left interest rates unchanged but did little to challenge the view it would pull the trigger next month.

The Federal Open Market Committee gave a bullish verdict on the US economy, noting that unemployment had dropped as growth in economic activity and household spending remained strong. Investment growth, the committee noted, had decelerated compared with earlier this year.

Forex and fixed income

Foreign exchange markets were settling down in Asia after a rally for the greenback on Thursday saw the dollar index measuring the US currency against a basket of peers climb 0.7 per cent.

The index was flat on Friday at 96.762, while the onshore exchange rate for China’s renminbi was 0.2 per cent weaker at Rmb6.9458 to the dollar.

Sovereign bond markets were quiet as 10-year US Treasury yields, which move opposite prices, fell 1 basis point to 3.224 per cent.

Commodities

Oil prices paused in early trading on Friday after two days of drops prompted by an unexpectedly large rise in US crude stockpiles on Wednesday that eased fears of a global supply shortfall after the US reimposed sanctions on Iran.

Brent crude, the international benchmark, was up 0.2 per cent at $70.77 a barrel, while US marker West Texas Intermediate held at $60.66.

Gold was off 0.3 per cent at $1,219.36 per ounce.

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