Monday 23 April 2018

Stocks fall as markets digest Fed rate hike, further oil falls

An investor holds onto prayer beads as he watches a board showing stock prices at a brokerage office in Beijing. Photo: Reuters
An investor holds onto prayer beads as he watches a board showing stock prices at a brokerage office in Beijing. Photo: Reuters

Asian shares took their cue from Wall Street and slipped on Friday, but were still on track for gains in a week marked by a depreciating yuan in China and the first U.S. interest rate hike in nearly a decade.

By contrast, Taiwan's central bank cut interest rates for the second time this year and said it would keep monetary policy loose to shore up growth in the island's trade-dependent economy as the global demand outlook worsened.

"The global macro dynamics from the beginning of a Fed rate hiking cycle are slowly playing out across the world. In the direct wake of the decision we have seen some dramatic moves in central bank policy with Taiwan cutting its benchmark interest rate, Hong Kong and Mexico both hiking rates, and Argentina removing currency controls and devaluing the peso by 30pc," Angus Nicholson, market analyst at IG in Melbourne, said in a note to clients.

China's yuan has weakened against the dollar for 10 straight sessions through Thursday, the longest weakening streak on record, after the central bank guided the Chinese currency lower.

Wall Street drooped on Thursday as crude oil futures continued to wallow at multi-year lows against a backdrop of oversupply as well as a stronger dollar following the US Federal Reserve's widely anticipated tightening on Wednesday.

US crude futures continued to slip in Asian trading, down 0.6pc at $34.74 a barrel. Brent ended trade on Thursday less than $1 above its 2004 low of $36.40.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4pc in early trade, but still on track to log a 1.5pc rise for the week.

Japan's Nikkei edged down about 0.1pc, poised for a weekly gain of 0.5pc, as investors awaited the conclusion of the Bank of Japan's two-day meeting expected later in the session.

BOJ policymakers are widely seen holding off on expanding the bank's massive stimulus programme.

Ahead of the policy review, the dollar was flat against the Japanese currency at 122.54 yen, and up over 1pc for the week.

The euro was up about 0.1pc $1.0834, but down more than 1pc for the week.

The dollar index, which tracks the greenback against a basket of six rivals, edged down about 0.2pc to 99.033, but was still up about 1.5pc for the week


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