Asian stocks lower on Federal Reserve rate hike expectation
SEOUL, SOUTH KOREA >> Asian stock markets were mostly lower on Wednesday as comments from Federal Reserve officials strengthened expectations of a rate hike by the Fed within this year.
Japan’s Nikkei 225 rose 0.5 percent to 16,821.92 while South Korea’s Kospi was flat at 2,054.30. Australia’s S&P/ASX 200 was down 0.5 percent to 5,454.30. Hong Kong’s Hang Seng index gained 0.4 percent to 23,781.59. Stocks in Southeast Asia and New Zealand were also lower. China’s Shanghai Composite Index was closed for a holiday.
Comments by several Federal Reserve officials strengthened investor expectations that the Fed would increase interest rates this year. Richmond Federal Reserve President Jeffrey Lacker said rates need to be increased to keep inflation under control, echoing the view held by Cleveland Federal Reserve President Loretta Mester, who said in an interview with Bloomberg that the economy is ripe for an interest rate increase. The Fed is expected by most investors to wait until December to raise rates.
THE QUOTE: “We think Cleveland Fed President Mester’s reiteration of her hawkishness caused investors to re-interpret the implications of the previous day’s manufacturing ISM report as signaling an increased likelihood of a December rate hike,” Tim Condon, head of research in Asia at ING in Singapore, said referring to the Institute for Supply Management manufacturing index. The index rose to 51.5 in September from 49.4 in August, indicating that U.S. manufacturing rebounded last month.
DIMMER US OUTLOOK
The International Monetary Fund lowered its forecast for the U.S. economy this year to 1.6 percent from the 2.2 percent it had predicted in July. It blamed the U.S. investment drought on cutbacks in the energy industry, a strong dollar that’s depressing exports and policy uncertainty surrounding the November elections. The fund left unchanged its forecast for overall global growth this year at 3.1 percent. But the world’s advanced economies are expected to grow 1.6 percent this year, down from the 1.8 percent the fund forecast in July, pulled down by slower expected growth in the United States. The IMF upgraded its forecast for Japanese growth to 0.5 percent this year and for the 19 countries that use the euro currency to 1.7 percent.
U.S. markets closed lower on Tuesday. The Dow Jones industrial average fell 85.40 points, or 0.5 percent, to 18,168.45. The S&P 500 fell 10.71 points, or 0.5 percent, to 2,150.49. The Nasdaq composite fell 11.22 points, or 0.2 percent, to 5,289.66.
OIL: U.S. benchmark crude oil added 46 cents to $49.15 per barrel in New York. The contract fell 12 cents to close at $48.69 per barrel on Tuesday. Brent crude, the international standard, advanced 44 cents at $51.31 a barrel in London.
The euro strengthened to $1.1222 from $1.1207 and the dollar slipped to 102.77 yen from 102.85 yen.
This file photo, shows the New York Stock Exchange. Stocks are drifting between gains and losses in early trading Tuesday. Nine of the 11 sectors of the Standard and Poor’s 500 index are lower. Utilities and real estate stocks are down the most.