Asian stocks mixed as traders digest Fed + BoJ announcements

Asian markets were mixed on Thursday as market participants digested monetary policy decisions and remarks from the Federal Reserve and the Bank of Japan.

Australia ASX -53.00 -0.92% 5,716.70 CLOSED

Shanghai Comp -8.18 -0.24% 3,357.81 CLOSED

Hang Seng Index -19.28 -0.07% 28,108.52 OPEN

Nikkei 225 +37.02 +0.18% 20,347.48 CLOSED

TSEC 50 Index +59.27 +0.56% 10,578.44 CLOSED

The Bank of Japan (BoJ) concluded its September monetary policy encounter only a few hours ago, betting on that a solid economic recovery will accelerate the pace of inflation growth towards its well-known 2 percent target without the need of adding further stimulus.

However, BoJ Governor Haruhiko Kuroda reminded investors that the “central bank will add more stimulus if needed”. Rates were maintained at minus 0.1 percent, while the 10-year JGBs yield target was left at nearly zero percent. The decision was adopted eight to one.

Overnight, market players digested the Federal Reserve announcement, which boosted speculation for a third rate hike by December and further monetary adjustments.

The US central bank said it will start unwinding its massive $4.5 trillion balance sheet in October, while reassuring that a third rate hike is still possible in the next few months.

“The reason for our actions today in beginning to run down the balance sheet is, we think the economy is performing well, and we have confidence in the outlook for the real economy,” said Yellen in a press conference following the event.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 65.8 percent probability of a 25 basis points rate hike by December.

Yellen also explained that the effects of hurricane Harvey and Irma are not presenting risks for middle term economic expansion. The regulator left interest rates at 1.00-1.25 percent.

“We continue to expect that the ongoing strength of the economy will warrant gradual increases in that rate to sustain a healthy labor market and stabilize inflation around our 2 percent longer-run objective,” added Yellen in her statement.

“Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.”

The Dow Jones Industrial Average ended the session at 22412.59, while the S&P 500 marked a 0.06 gain and the Nasdaq Composite eased 0.08 percent.

Fort Financial Services