Asian markets slip as Fed holds
ASIAN markets dropped yesterday, picking up where they left off after last week’s Fed-inspired rally ran out of steam.
After a burst of enthusiasm on the back of the US central bank’s decision to keep interest rates on hold for a little longer, screens were red across the world – with the pace of decline sharply quickened.
The stay of execution for easy money served to bolster the Japanese yen, knocking the stuffing out of Tokyo which ended down 1.25 percent.
A stronger yen tends to make Japanese stocks less desirable.
Big markets in Asia followed suit, with Hong Kong and Shanghai also shedding more than 1pc.
Oil had appeared to offer some hope, after losing more than 3pc on September 23, but could not hold onto its gains as the day wore on.
“Oil spot prices will have a big influence on where equities markets are going to trade for the early part of the week,” said Angus Nicholson, a Melbourne-based analyst at IG Ltd.
Two years of oversupply and OPEC’s failure to forge any kind of consensus on how to deal with it have left observers sceptical of any change in direction at the meeting in Algeria this week.
On equities markets, Hong Kong spent the day in negative territory shedding 1.6pc to close at 23,317.92.
The news was just as bad in Shanghai, where the benchmark Shanghai Composite Index dropped 1.8pc to 2980.43.
Sydney closed flat, while Taiwan gave up 1 percent and Seoul slipped 0.3pc.
The yen was higher yesterday, with currency traders apparently emboldened by last week’s Bank of Japan move to target 10-year government bonds in its latest bid to fuel inflation.
“The Bank of Japan has lost control of the yen,” said Matthew Sherwood, head of investment strategy in Sydney at Perpetual Ltd.
“The only hope for Japan and the yen may be an aggressive Fed, but this is looking next to impossible despite an apparent split in the Fed Open Market Committee.”
Oil traders pushed both benchmarks moderately higher in early Asian trade, but retreated later.
West Texas Intermediate for November delivery was flat at US$44.53 while Brent crude sat at $45.89.