Asian markets gain after Fed keeps rates on hold

Asian markets traded higher on Monday afternoon after the U.S. Federal Reserve announced it was keeping interest rates on hold, and indicated that no more rate hikes would be coming in 2019.

The broad MSCI Asia-ex Japan index rose 0.44 percent to 531.47, as of 12:34 p.m. HK/SIN.

Mainland Chinese shares gained by the morning session’s end, as the Shanghai composite advanced 0.72 percent and the Shenzhen component added 0.755 percent. The Shenzhen composite rose 0.904 percent.

In South Korea, the Kospi retraced some of its earlier gains but was still higher by 0.3 percent in afternoon trade as chipmaker SK Hynix saw its stock surge more than 6 percent.

Japanese stock markets were closed on Thursday for a holiday.

Australia jobless rate

Australia’s ASX 200 bucked the overall trend to slip slightly lower, at about 0.03 percent, with the heavily weighted financial subindex declining more than 0.3 percent as bank shares sold off.

The moves Down Under came after a report from the Australian Bureau of Statistics (ABS) showed the country’s jobless rate at a near eight-year low in February, according to Reuters.

“Some employment reports are more keenly anticipated than others. Today was one of those reports that felt like a big one given the ongoing disconnect between the activity data and monthly updates on the labour market. It was also the employment report that followed the weak Q4 national accounts published two weeks ago,” Gareth Aird, senior economist at Commonwealth Bank of Australia, said in a note following the data release.

“Today’s data essentially validates why the (Reserve Bank of Australia) has said that the next move in interest rates could be up or down,” Aird said.

With investors initially anticipating a possible rate cut by the Australian central bank, Thursday’s data release moderated those expectations and sent the Australian dollar soaring to a high of $0.7167 after an earlier low of $0.7111. It last traded at $0.7144.

The Fed announced on Wednesday that it would hold steady on interest rates and indicated that no more hikes would be coming this year. That was a reversal from its stance three months ago, when the central bank projected two interest rate hikes for 2019.

That announcement sent the 10-year Treasury yield to its lowest in a year, with the Dow Jones Industrial Average and S&P 500 also taking a knock as bank stocks sold off.

The 30-stock Dow fell 141.71 points to close at 25,745.67, while the S&P 500 finished its trading day 0.3 percent lower at 2,824.23. The Nasdaq Composite, on the other hand, closed a touch higher, up 0.07 percent at 7,728.97.

“Markets were geared up for a relatively dovish Fed and in the event got something even more dovish than they (were) expecting,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, wrote in a morning note.

The Fed currently holds its benchmark funds rate in a range of 2.25 percent to 2.5 percent. The rate is used as a key for determining interest on most adjustable-rate consumer debt, like credit cards and home equity loans.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 95.915 as it attempted to recover after slipping sharply from highs above 96.4 seen in the previous session.

The Japanese yen traded at 110.43 against the dollar, after seeing lows above 111.6 in the previous session.

Meanwhile, investors continue to keep a lookout for developments on the U.S.-China trade front, with U.S. President Donald Trump telling reporters on Wednesday that Washington’s tariffs on Beijing could stay on for a “substantial period of time.” His comments confused some traders, as Trump also said a deal is “coming along nicely.”

A day before the president’s comments, Bloomberg News reported that some U.S. officials are worried China could walk back on some concessions. Negotiations will restart next week when U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to Beijing. Those reports buffeted stocks on Tuesday.

Oil prices were mixed in Asia’s afternoon trade, with the international benchmark Brent crude futures rising 0.1 percent to $68.57 per barrel. U.S. crude futures, on the other hand, declined fractionally to $60.18 per barrel.

Source: CNBC