Stocks across Asia were mostly higher on Thursday following the Federal Reserve’s decision to cut interest rates overnight, despite investors being forced to weigh up the prospect of a more hawkish than expected outlook from the US central bank.
Japan’s benchmark Topix pared many of its early gains to trade 0.7 per higher. That was after the Bank of Japan held its benchmark policy rate at minus 0.1 per cent, but hinted at potential action in October. The yen rallied past ¥107.80 to the dollar after the BoJ decision.
On Wednesday, the Fed’s Open Market Committee cut its benchmark lending rate by 25 basis points, marking its second interest rate reduction this year, as it seeks to reinvigorate the US economy as a global slowdown gathers steam. However, projections suggest that Fed officials are divided on the path ahead for interest rates. That has disappointed parts of the market that were anticipating a more dovish outlook from the central bank, prompting the greenback to strengthen.
“With two FOMC voters voting for no change in this meeting and the dot plot showing the median projection for policy rate to stay unchanged until the end of the year, it will take some time to convince the market to adopt this more hawkish view,” said Tai Hui, JPMorgan Asset Management’s Asia chief market strategist.
Elsewhere in equities, Hong Kong’s Hang Seng was 1.2 per cent lower, while Australia’s S&P/ASX 200 and South Korea’s Kospi were 0.6 per cent and 0.2 per cent higher, respectively.
In currencies, the Australian dollar fell 0.6 per cent against the dollar after unemployment rose in August, raising the prospect of further interest rate cuts by the central bank. The country’s sovereign bonds rallied.
S&P 500 futures were pointing to losses of 0.3 per cent when Wall Street begins trading later on Thursday.
- UK retail sales
- Bank of England interest rate decision
- Bank of Indonesia interest rate decision