Last Update 22:46
Thursday, 24 October 2019

Asian markets mostly up but Fed leaves traders seeking more

AFP , Thursday 19 Sep 2019
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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.

While the Fed met expectations with a 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.

However, the board is split, with five members expecting or prefering a rate hike by the end of the year, five seeing no change, and seven forecasting or wanting to see another cut.

Tim Foster at Fidelity International pointed out that policymakers' so-called "dot plot" projections do not show any consensus for further cuts this year.

"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," he said.

"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."

The Bank of Japan decided to hold fire after its own policy meeting Thursday but warned of headwinds including the China-US trade war and Britain possibly leaving the European Union without a divorce deal.

It said it would maintain its ultra-loose monetary policy, vowing to keep interest rates low at least until the spring of 2020, adding it would keep an eye on inflation and the economy going into its October meeting.

Tokyo's Nikkei was up more than one percent ahead of the announcement but pared the gains in the afternoon to end 0.4 percent higher as the yen rallied against the dollar.

Shanghai rose 0.5 percent, Sydney and Seoul were each up 0.5 percent, Singapore added 0.1 percent and Wellington gained 0.2 percent.

However, 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 more than one percent by the break.

Taipei, Manila, Mumbai, Bangkok and Jakarta also fell.

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.

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. US Secretary of State Mike Pompeo called the strikes an "act of war", while Riyadh unveiled evidence it said showed "unquestionably" that it was sponsored by Iran.

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.

The Bank of England is due to make its own rate decision later in the day, though there is little expectation for it to move before it has a clearer idea about the Brexit situation.

In early trade London fell 0.2 percent, Paris was flat and Frankfurt shed 0.3 percent.

- Key figures around 0720 GMT -
Tokyo - Nikkei 225: UP 0.4 percent at 22,044.45 (close)

Hong Kong - Hang Seng: DOWN 1.3 percent at 26,414.81

Shanghai - Composite: UP 0.5 percent at 2,999.28 (close)

London - FTSE 100: DOWN 0.2 percent at 7,296.55

West Texas Intermediate: UP 24 cents at $58.35 per barrel

Brent North Sea crude: UP 29 cents at $63.89 per barrel

Euro/dollar: UP at $1.1046 from $1.1034 at 2100 GMT

Dollar/yen: DOWN at 107.89 yen from 108.43 yen

Pound/dollar: DOWN at $1.2470 from $1.2481

Euro/pound: UP at 88.58 pence from 88.40 pence

New York - Dow: UP 0.1 percent at 27,147.08 (close)

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