Global stocks slide ahead of Fed de­ci­sion

Kuwait Times - - BUSINESS -


Global stocks fell yes­ter­day ahead of a Fed­eral Re­serve meet­ing that is ex­pected to raise US in­ter­est rates, while oil prices jumped af­ter sev­eral non-OPEC coun­tries agreed to join the car­tel in cut­ting out­put.

Bri­tain’s FTSE 100 was down 0.3 per­cent to 6,933 and Ger­many’s DAX shed 0.2 per­cent to 11,186. France’s CAC 40 was flat at 4,763. On Wall Street, the fu­ture for the Dow Jones in­dus­trial av­er­age was up 0.1 per­cent and that for the Stan­dard & Poor’s in­dex was un­changed.


In­vestors ex­pect Fed gov­er­nors, meet­ing Thurs­day, to raise rates for only the sec­ond time in a decade. The Fed has kept rates close to zero since the 2008 global cri­sis but its lead­ers have in­di­cated the US econ­omy has strength­ened enough to start grad­u­ally re­turn­ing to nor­mal pol­icy. The elec­tion of Don­ald Trump, who has promised tax cuts and higher spend­ing, has raised ques­tions about whether the Fed will de­lay fu­ture moves to see how that plays out. In­vestors are ex­pected to look at Fed com­ments on the eco­nomic out­look for clues to its next move on rates.

“A quar­ter-point rate hike looks al­most cer­tain,” Jim O’Sul­li­van of High Fre­quency Eco­nomics said in a re­port. “The tone of the state­ment will prob­a­bly be a more up­beat than last time, but we don’t ex­pect pro­jec­tions to change sig­nif­i­cantly.” China stocks suf­fered their big­gest drop since June to hit a one-month low yes­ter­day, as fresh reg­u­la­tory curbs were put on trad­ing by in­sur­ance com­pa­nies and wor­ries about in­com­ing US pres­i­dent Don­ald Trump’s China pol­icy rat­tled in­vestors. The down­beat mood spread to Hong Kong, where in­vestors were al­ready cau­tious ahead of a likely US in­ter­est rate in­crease this week.

In main­land mar­kets, an­a­lysts said in­vestors were spooked by an an­nounce­ment by the coun­try’s in­sur­ance reg­u­la­tor late on Fri­day that it had sus­pended Ever­grande Life, the in­sur­ance arm of China Ever­grande Group, from con­duct­ing stock mar­ket in­vest­ments due to its spec­u­la­tive, fre­quent, high-vol­ume trad­ing.

The Shang­hai Com­pos­ite In­dex tum­bled 2.5 per­cent to 3,152.97 points and Hong Kong’s Hang Seng lost 1.5 per­cent to 22,410.10. Tokyo’s Nikkei 225 shed 0.9 per­cent to 19,155.03 and In­dia’s Sen­sex lost 0.5 per­cent to 26,606.01. Seoul’s Kospi gained 0.1 per­cent to 2,027.24 while Syd­ney’s S&PASX 200 was un­changed.

The op­po­si­tion-con­trolled leg­is­la­ture passed an im­peach­ment mo­tion Fri­day against Pres­i­dent Park Geun-hye fol­low­ing ac­cu­sa­tions by pros­e­cu­tors that she col­luded with a long­time friend to ex­tort money and fa­vors from South Korea’s big­gest com­pa­nies and gave that con­fi­dante in­flu­ence over gov­ern­ment de­ci­sions. Prime Min­ster Hwang Kyo-ahn is to lead a care­taker gov­ern­ment while a court weighs Park’s fate. Park has apol­o­gized for putting trust in her friend, Choi Soon-sil, but has de­nied any le­gal wrong­do­ing. The dol­lar rose to 115.77 yen from Fri­day’s 115.29 yen. The euro also gained, to $1.0600 from $1.0562.

The blue-chip CSI300 in­dex fell 2.4 per­cent to 3,408.58 points, and the Shang­hai Com­pos­ite In­dex lost 2.5 per­cent to 3,152.47 points. “The mar­ket dropped be­cause sev­eral in­sur­ers are not al­lowed to buy stocks. This has changed in­vestors’ ex­pec­ta­tions,” said David Dai, Shang­haibased in­vestor di­rec­tor at Nan­hai Fund Man­age­ment Co.

Also late on Fri­day, Fore­sea Life In­sur­ance, a unit of Bao­neng, said that it would not fur­ther boost its stake in Gree Elec­tric Ap­pli­ances Inc of Zhuhai. Gree shares, which had surged by Forsea Life’s ag­gres­sive stake-build­ing, plum­meted more than 6 per­cent yes­ter­day. Other com­pa­nies favoured by in­sur­ers, in­clud­ing China Vanke Co Ltd, China State Con­struc­tion En­gi­neer­ing Corp Ltd and Poly Real Es­tate Group Co Ltd, also saw their shares tumble.

One-China pol­icy

US Pres­i­dent-elect Don­ald Trump’s rhetoric call­ing into ques­tion the United States’ long-stand­ing po­si­tion that Tai­wan is part of “one China” and broader ques­tions about his pro­tec­tion­ist agenda were seen by some an­a­lysts as drag­ging down shares in Hong Kong. The bench­mark Hang Seng in­dex dropped 1.4 per­cent, to 22,433.02 points, while the Hong Kong China En­ter­prises In­dex lost 1.7 per­cent, to 9,699.31 points. “You can sense the ner­vous­ness...the big caps got hit quite early today, and I think it’s re­lated to Don­ald Trump,” said Alex Wong, Hong Kong-based di­rec­tor at Am­ple Fi­nance Group. Wong added that there was con­cern about re­tal­ia­tory ac­tion from China, a ma­jor holder of US gov­ern­ment debt.

“The mar­ket is await­ing new poli­cies from Trump af­ter he takes of­fice, which makes in­vestors more cau­tious. It’s not easy to mea­sure the in­flu­ence now. I think the main rea­son for today was the slump in main­land peers,” he said. Nearly all sec­tors lost ground in both China and Hong Kong. Zhang Qi, an­a­lyst at Haitong Se­cu­ri­ties in Shang­hai, said year-end profit-tak­ing was also a fac­tor in the main­land mar­kets. —Agen­cies

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