Asian markets sink with Wall St after Fed minutes
HONG KONG: Asian markets turned lower on Thursday, tracking a sell-off on Wall Street as investors were spooked by Federal Reserve minutes showing it is mulling a plan to tighten monetary policy by sucking cash out of the financial system.
New York’s three main indexes turned lower on news that central bank policy-makers were considering stopping, or at least slowing, the policy of reinvesting the income received from its $4.5 trillion-worth of Treasury bills and other assets.
Because the Fed’s involvement in the bond market helps suppress interest rates, its decision to leave it would reduce the amount of cash in the system.
The Fed also noted “some participants (in the March meeting) viewed equity prices as quite high relative to standard valuation measures”.
The report overshadowed data showing a better-than-forecast jump in private-sector hiring, days ahead of closely watched jobs figures from the government.
The minutes of the March meeting — in which the bank hiked interest rates — also showed policy board members saw “considerable uncertainty” about the effects Donald Trump’s pledged taxcut and infrastructure spending stimulus would have on the US economy.
The tycoon’s promises helped fuel a four-month surge across global markets but that faltered in March after his failure to push through a key healthcare bill raised concerns about the chances for the rest of his agenda.
Tokyo ended 1.4 per cent lower, with the dollar retreating against the yen as traders bet the minutes suggested the Fed’s need to raise interest rates had been dampened.
Hong Kong lost 0.5 per cent as Sydney fell 0.3 per cent while Seoul lost 0.4 per cent and Singapore 0.2 per cent. However, Shanghai closed 0.3 per cent higher.
“With the Fed minutes showing officials saying valuations for US shares may be high, it’s difficult to take on additional risk,” said Juichi Wako, a senior strategist at Nomura Holdings.
Investors were already nervous ahead of a two-day summit between US President Donald Trump and his Chinese counterpart Xi Jinping that begins on Thursday.
The meeting comes after Trump’s long-running criticism of China’s trade policy — which he says is unfair to the US — and accusations it is a currency manipulator. In early European trade London fell 0.8 per cent, while Paris and Frankfurt each lost 0.6 per cent.
Gold edged lower on Thursday, pressured by a slightly firmer dollar and as some investors sold to redeem profits after bullion’s recent challenge to the upside. Spot gold inched down 0.1 per cent to $1,253.21 per ounce by 09:55 GMT, retreating from an overnight peak of $1,258.96.
US gold futures were up 0.5 per cent at $1,255.30, after climbing as much as 1 per cent to $1,260.80 earlier in the day The slight uptick in the dollar and some profit taking after the move late yesterday is probably bringing in that bit of weakness,” said Jonathan Butler, commodities analyst at Mitsubishi in London.
Spot gold hit $1,261.15 on Tuesday, its highest since February 27, but has failed to breach a key 200-day moving average of $1,258.
The dollar index, which measures the greenback against a basket of currencies, was slightly firmer.
Supporting gold was some safe haven interest on the back of a dip in stocks on Thursday, with risk appetite soured by signs the Federal Reserve might start paring asset holdings later this year just as the chance of early US fiscal stimulus seems to be evaporating.
Spot silver dropped 0.3 per cent to $18.21 an ounce.
Platinum fell 0.8 per cent to $951.50, while palladium gave up 0.3 per cent to $802.50.
It hit a more than two-year high of $815.70 in the prior session.