World shares mixed following Fed’s decision to cut rates

Elaine Kurtenbach

BANGKOK (AP) – Shares opened higher in Europe yesterday after a mixed session in Asia following the Federal Reserve’s decision to cut its benchmark interest rate for a second time this year.

Germany’s DAX edged 0.1 per cent higher to 12,406.82 while the FTSE 100 in Britain advanced 0.2 per cent to 7,331.84. In France, the CAC 40 gained 0.5 per cent to 5,641.35. United States (US) shares looked set for losses, with the Dow future contract down 0.3 per cent and that for the S&P 500 also 0.3 per cent lower.

Banks led gains following the quarter-point cut in the Fed’s short-term interest rates to a range of 1.75 per cent to two per cent. Deutsche Bank jumped nearly two per cent while Royal Bank of Scotland Group advanced 2.4 per cent and HSBC climbed 0.7 per cent.

“Everything feels a little flat in the markets after the Fed left investors deflated and frustrated, despite delivering the 25 basis point rate cut they demanded,” Craig Erlam of Oanda said in a commentary.

“While investors may be frustrated about this, it’s probably not the worst approach as we don’t know how long the trade war will last, how much worse it will get and what the full consequences will be.”

Chinese investors monitor stock prices at a brokerage house in Beijing. PHOTO: AP

Japan’s central bank opted to keep its own monetary policy unchanged and its key interest rate at minus 0.1 per cent, as expected.

The decision came amid signs of weaker consumer demand and exports and dimming confidence in the business outlook.

“The bank did highlight increasing downside risks from external demand and stated that it will pay closer attention to the possibility that momentum towards reaching its two per cent inflation target will be lost,” Marcel Thieliant of Capital Economics said in a commentary.

In Asia, the Nikkei 225 index gained 0.4 per cent to 22,044.45 while the Kospi in Seoul climbed 0.5 per cent to 2,080.35. Australia’s S&P ASX 200 added 0.5 per cent to 6,717.50, while late gains pushed the Shanghai Composite index up 0.5 per cent, to 2,999.28.

Hong Kong’s Hang Seng declined 1.0 per cent to 26,480.74. Its monetary authority announced a quarter-percentage point rate cut yesterday. The monetary authority routinely follows the Fed’s lead to keep the Hong Kong dollar rate steady against the US dollar.

India’s Sensex dropped 1.1 per cent to 36,155.69. Shares also fell in Singapore, Taiwan, Thailand and Indonesia. Brazil’s central bank cut its benchmark rate on Wednesday, by 0.5 per cent, and more decisions were expected yesterday from Indonesia, the Bank of England and the central banks in Sweden and Norway.

Overnight on Wall Street, stocks initially declined after the central bank announced the widely expected rate cut. Its policy statement failed to indicate whether more rate cuts were likely this year, though the central bank left the door open for additional rate cuts if the economy weakens.

The Fed is trying to combat threats to the US economy, including uncertainties caused by President Donald Trump’s trade war with China, slower global growth and a slump in American manufacturing.

The US market is on track for a slight weekly loss after three consecutive weeks of gains driven by signs of an easing in tensions in the US-China trade war.

Fresh talks in the dispute over technology and other policies are due in October.

Bond prices rose and the yield on the 10-year Treasury fell to 1.78 per cent from 1.81 per cent late Wednesday. Investors typically shift money into bonds when they grow more concerned about the economy’s health.

ENERGY: Oil prices were steady as Saudi Arabia said it was restoring production at an oil facility attacked over the weekend. Benchmark US crude gained 14 cents to USD58.25 per barrel in electronic trading on the New York Mercantile Exchange. Overnight, it lost USD1.23 to settle at USD58.11 per barrel. Brent crude, the international standard, picked up 19 cents to USD63.79.

The dollar slipped to 108.04 Japanese yen from 108.42 yen on Wednesday. The euro rose to USD1.1057 from USD1.1029.