Market sentiment had been bullish up until Fed policymakers’ comments late on Wednesday highlighted uncertainties over the U.S. recovery, with the S&P 500 and the Nasdaq hitting all-time highs driven largely by Apple Inc..
But on Thursday, Asian equities and U.S. futures fell hurt by the U.S. Federal Reserve’s cautious view of the economy, tensions with China and new clusters of coronavirus infections.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.24 per cent, U.S. stock futures, the S&P 500 e-minis, were down 0.61 per cent.
Australian stocks dropped 1.04 per cent due to concern that ties with China will worsen further after a report that Australian regulators will reject acquisitions by a Chinese company.
Shares in China fell 0.8 per cent, and Japanese stocks slid 0.77 per cent. South Korean stocks tumbled 2.11 per cent amid a spike in coronavirus cases in Seoul.
The iPhone maker’s shares rose 1.4 per cent to make the first publicly listed U.S. company reach $2 trillion in market capitalisation, while strong results from retailers Target and Lowe’s also lifted sentiment.
The positive mood quickly faded however after several Fed members said additional easing may be needed because a rebound in employment was already slowing.
The downbeat tone spilled over into Asia, which weighed on equities and oil futures but pushed gold prices slightly higher due to economic uncertainty.
“We’ve seen some good numbers out of retail but there’s uncertainty that these companies won’t replicate those earnings without some stimulus.”
Cooling Wall Street’s earlier rally were minutes from the Fed’s July meeting, which showed the swift rebound in employment seen in May and June had likely slowed and that additional “substantial improvement” in the labour market would hinge on a “broad and sustained” reopening of business activity.
The readout on Fed discussions provides hints to further action that the U.S. central bank could take in September. No change in interest rate policy is expected until end-2021.
Wall Street stocks retreated and later closed lower on the Fed news. The Dow Jones Industrial Average fell 0.31%, the S&P 500 lost 0.44% and the Nasdaq Composite dropped 0.57 per cent.
Spot gold rose 0.51 per cent to $1,939.28 per ounce in Asia on Thursday, recovering from a 3.6 per cent tumble on Wednesday as the cautious mood boosted demand for the safe harbour asset.
The yield on benchmark 10-year Treasury notes fell slightly to 0.6623% while those on the 20-year bond also fell to 1.1708 per cent in Asia.
Some bond investors were also disappointed after the Fed minutes showed central bankers downplayed the chance of capping bond yields.
Oil prices edged lower over lingering concerns of weak global fuel demand after data showed that U.S. crude stockpiles fell 1.6 million barrels last week.
Brent crude futures fell 0.75 per cent to $45.03 a barrel. U.S. crude futures slid by 0.96 per cent to $42.52 a barrel.