Asian shares fall after Fed rate hike, tracking Wall St lead

Adjust Comment Print

The S&P 500 fell 0.1 percent, after fluctuating for most of the session, while the tech-heavy Nasdaq indexes retreated 0.4 percent.

TOKYO (AP) - Shares fell in Asia on Thursday after the U.S. Federal Reserve raised interest rates, as expected.

In explaining the second rate hike of this year and plans for more increases in the coming months, Federal Reserve Chair Janet Yellen said the move reflected progress in the world's largest economy, which continues to add jobs at a solid pace.

The 10-year U.S. Treasuries yield had slipped to as low as 2.103 percent and last stood at 2.129 percent.

Risk sentiment was also hit by fear of more USA political turmoil after the Washington Post reported that President Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice.

Crude oil prices were listless after having slumped almost 4 percent to their lowest close in seven months on Wednesday, on an unexpected large build in gasoline inventories. One more rate hike is expected before the end of 2017.

The US Fed needs to raise rates further so they can cut them again when US growth slows down in 2018 or 2019, says Dickie Hodges, head of unconstrained fixed income at Nomura. The Fed expects that inflation will not hit the current target, of two percent, and it has revealed plans for unwinding the post-asset purchasing balance sheet, which now totals nearly $4.5 trillion.

In details about its plans to wind down quantitative easing, the Fed said it initially would set a cap of $6 billion a month above which it will reinvest proceeds from the repayment of principal for Treasury bonds under its asset purchases program.

Earlier, President Donald Trump warned that the dollar "is getting too strong", repeating his opinion that the currency's gain makes American products less competitive globally.

After having gained strong support after the weak United States data, gold hit resistance close to $1,280 and fell sharply to lows below $1,260.

Near term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely.

"The main focus this week will be on the Fed's balance sheet policy", said Michelle Girard, chief USA economist at RBS.

The euro was down 0.3 percent at $1.1183, a six-day low, while the yen was flat at 109.58 per dollar.

Relatively upbeat economic data from China and a surge in expectations of higher Canadian interest rates have helped currencies of commodities-related economies.

Inflation tends to erode bonds' value over time, with a signal of easing inflation sparking some buying in government paper, driving yields down. Benchmark U.S. crude fell another 2 cents to $44.71 a barrel in electronic trading on the New York Mercantile Exchange. In Britain, the Bank of England saw three of its eight rate-setters vote for a rate increase, a fact that suggests a hike is much closer than many investors had expected.

Comments