Global stocks slide ahead of Fed decision

BEIJING:

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.

KEEPING SCORE: FED WATCH:

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