Oct 31, 2019: Most Asian markets were mixed Thursday after the Federal Reserve cut interest rates again and data showed the US economy remained “resilient”, though gains were tempered by the bank's indication it is unlikely to make any more reductions.
The dollar struggled to recover from the widely expected move, with the broadly upbeat mood providing support to higher-yielding, riskier currencies, while the pound was also helped by receding Brexit worries.
After announcing the third cut this year — having raised rates four times in 2018 — Fed chief Jerome Powell said that while the China-US trade row and Brexit uncertainty had hit investment, the economy had been “resilient to the winds that have been blowing this year”.
His comments came after data showed growth dipped marginally in the third quarter to 1.9 percent but was much better than the 1.6 percent forecast. A reading on private-sector jobs also showed a better-than-expected rise.
He added: “We took this step to help keep the US economy strong in the face of global developments and to provide some insurance against ongoing risks.”
The bank's statement indicated policy board members would not unveil another cut next month, and Powell added that it would only do so “if developments emerge that cause a material reassessment of our outlook”.
Investors cheered the news, with the S&P 500 on Wall Street rallying to its second record close in three days, while the Dow and Nasdaq also rose as investors are also buoyed by progress in the China-US trade talks and strong earnings.
“We believe progress on US-China trade negotiation, expectations of a bottoming out of global (factory activity data) and a respectable third-quarter earnings growth report card are all supporting market sentiment,” said Tai Hui, Asia chief market strategist at JP Morgan Asset Management.
“When market risk appetite is positive, the Fed pausing can also be seen as an endorsement that the economy is still in good shape and no additional stimulus is needed.”
– Hong Kong in focus –
Asian investors struggled to ride the coat-tails of their US counterparts.
Hong Kong rallied one percent but with traders there nervously awaiting the release of economic growth data that is expected to show the city fell into recession as a result of months of sometimes violent protests that have hammered the key tourist and retail sectors.
Tokyo went into the break 0.2 percent higher and Singapore was up 0.6 percent, while Taipei put on 0.2 percent.
Seoul rallied 0.9 percent, boosted by a jump in market heavyweight Samsung after its earnings beat estimates.
But Shanghai eased 0.1 percent after figures pointed to another contraction of China's crucial manufacturing industry owing to the US trade war.
There were also losses in Sydney and Wellington.
Attention is now on Friday's government employment report, which will give another snapshot of the world's top economy, while dealers are also waiting for developments in the trade talks.
JP Morgan's Hui said that Chile's decision to cancel next month's APEC summit, where Donald Trump and Chinese counterpart Xi Jinping were due to sign a mini agreement, should not be “a deal breaker”.
“If the two sides were genuinely willing to reach an interim deal before mid-December, when the next scheduled hike in tariff on Chinese exports is due to take place, they will find a venue to get the deal done.”
– Key figures around 0230 GMT –
- Tokyo – Nikkei 225: UP 0.2 percent at 22,887.06 (break)
- Hong Kong – Hang Seng: UP 1.0 percent at 26,930.35
- Shanghai – Composite: DOWN 0.1 percent at 2,936.33
- Pound/dollar: UP at $1.2920 from $1.2899 at 2100 GMT
- Euro/pound: DOWN at 86.40 pence from 86.42 pence
- Euro/dollar: UP at $1.1166 from $1.1149
- Dollar/yen: DOWN at 108.65 yen from 108.85 yen
- West Texas Intermediate: DOWN three cents at $55.03 per barrel
- Brent North Sea crude: UP seven cents at $60.68 per barrel
- New York – Dow: UP 0.4 percent at 27,186.69 (close)
- London – FTSE 100: UP 0.3 percent at 7,330.78 (close).