Asian stocks follow Wall Street lower after Fed rate cut
BEIJING (AP) — Asian stock markets followed Wall Street lower yesterday after the United States (US) central bank cut its key interest rate but left investors uncertain about future reductions.Benchmarks in Shanghai, Hong Kong, Australia and Tokyo all tumbled.
The Federal Reserve’s quarter-point cut, its first in a decade, was widely expected. But Chairman Jerome Powell disappointed investors by saying at a news conference the central bank had no plans for a long cycle of lowering interest rates. He called Wednesday’s cut a “midcycle adjustment”.
Powell was “less dovish than expected,” said Jingyi Pan of IG in a report. Pan said market declines reflect “significant disappointment” that the Fed wasn’t “embarking on the beginning of a rate cut cycle.”
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The CME Fedwatch Tool, operated by CME Group Inc, said investors expect only one more US rate cut of one-quarter point this year, down from previous expectations of two.
Powell’s comments “suggested that the Fed is largely undetermined in their next steps,” said Pan.
The Shanghai Composite Exchange lost 0.8 per cent to 2,909.75 and Hong Kong’s Hang Seng shed 0.7 per cent to 27,580.21. Sydney’s S&P-ASX 200 lost 0.3 per cent to 6,793.20 and benchmarks in New Zealand, Taiwan and Southeast Asia also retreated.
South Korea’s Kospi gained three points to 2,028.44 and India’s Sensex was down 11 points at 37108.81.
On Wall Street, the Standard & Poor’s 500 index had its worst day in two months, falling 1.1 per cent to 2,980.38. The index had hit an all-time high.
The Dow Jones Industrial Average lost 1.2 per cent to 26,864.27. The Nasdaq composite fell 1.2 per cent to 8,175.42.
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The Fed hopes the rate cut will counter threats to the US economy ranging from uncertainties caused by the nation’s trade disputes to chronically low inflation and a dimming global growth outlook.
Fed officials had signalled their readiness to take action to help shore up the US growth, which faces threats from a tariff war with China.
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