Global shares retreat after Fed minutes bring reality check

TOKYO (AP) — Global shares slipped yesterday after sobriety set in on Wall Street, and the United States (US) Federal Reserve minutes laid out challenges for the economy amid the coronavirus pandemic.

France’s CAC 40 fell 1.6 per cent in early trading to 4,898.58, while Germany’s DAX dropped 1.6 per cent to 12,775.71.

Britain’s FTSE 100 was down 1.3 per cent at 6,030.68. US shares were set to drift lower with Dow futures down 0.6 per cent at 27,469.0. S&P 500 futures slipped nearly 0.6 per cent to 3,353.12.

“The latest Fed minutes had been one to offer a reality check for markets, though with the elevated prices, it had likely been an excuse to take some profit off the table as well,” said a market strategist Jingyi Pan at IG.

“Most notably, Fed minutes from the July FOMC meeting had reflected officials’ views on the pandemic weighing heavily on the economy and posing risks to the medium-term outlook,” she said.

The central bank has been one of the main pillars propping up the market after it slashed short-term interest rates to their record low and essentially promised to buy as many bonds as it takes to keep markets running smoothly.

The Fed’s minutes of its latest policy meeting, released late on Wednesday, showed policy makers are finding it difficult to forecast the path of the economy, which will depend greatly on what happens with the virus.

“In no uncertain terms, the FOMC minutes deflated the markets’ Federal Reserve air balloon as the minutes unequivocally temper September.

A woman walk in front of an electronic stock board showing Japan’s Nikkei 225 and NY Dow indexes at a securities firm in Tokyo yesterday. PHOTO: AP

So without the Fed air balloon floating markets today, stocks are temporarily succumbing to forces of gravity,” said Chief Global Market Strategist Stephen Innes at AxiCorp. Japan’s benchmark Nikkei 225 dropped 1.0 per cent to finish at 22,880.62. South Korea’s Kospi plunged 3.7 per cent to 2,274.22. Australia’s S&P/ASX 200 fell 0.8 per cent to 6,120.00.

Hong Kong’s Hang Seng lost 1.5 per cent to 2,274.22, while the Shanghai Composite fell 1.3 per cent at 3,363.90.

The Asian region depends heavily on a healthy US economy to keep its growth going.

Export-dependent Japan has sunk into recession, slammed by the slowdowns in the US, as well as China, with production halted, tourism squelched and consumption crimped. Analysts said a recovery is likely coming for the world’s third-largest economy, but also acknowledge great uncertainty without a vaccine for COVID-19.

Investors around the world are also waiting for developments on the rising tensions between the US and China.

The world’s largest economies have longstanding trade issues, and US President Donald Trump has recently been targetting Chinese tech companies.

Also hanging over the market is the upcoming US election, with potential big changes in policies.

In the latest accolade for Big Tech, Apple’s total market value briefly topped USD2 trillion, the first time a US company has crossed that threshold.

Technology companies, including video-game maker Nintendo Co of Japan, are thriving as the pandemic accelerates work-from-home and other tech-friendly trends.

Benchmark US crude fell 39 cents to USD42.54 a barrel in electronic trading on the New York Mercantile Exchange. It rose four cents to USD42.93 per barrel on Wednesday. Brent crude, the international standard, fell 37 cents to USD45.00 a barrel.

The US dollar was trading at JPY106.07, down from JPY106.13.

The euro cost USD1.1815, down from USD1.1934.