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Asian Markets Mostly Lower After Fed Announcement

asiancommentary aug17 16sep20 lt

Asian stock markets are mostly lower on Thursday amid worries about the economic recovery from the coronavirus pandemic despite a dovish monetary policy announcement by the U.S. Federal Reserve, with the central bank leaving interest rates unchanged and signaling rates are likely to remain at near-zero levels for years to come.

The economic projections provided by the central bank along with the announcement suggest most Fed officials expect interest rates to remain unchanged through at least 2023.

The Australian market is declining following the mostly negative cues from Wall Street and despite the release of data showing an unexpected drop in Australia's unemployment rate for August.

Meanwhile, the Organisation for Economic Cooperation and Development or OECD has projected a smaller economic contraction for Australia this year, but lowered its growth forecast for Australia in 2021.

The benchmark S&P/ASX 200 Index is losing 37.00 points or 0.62 percent to 5,919.10, off a low of 5,916.80 earlier. The broader All Ordinaries Index is lower by 38.70 points or 0.63 percent to 6,108.20. Australian stocks closed notably higher on Wednesday.

In the tech sector, Afterpay is losing almost 3 percent, while Appen and WiseTech Global are lower by more than 1 percent each after their U.S. peers fell overnight.

The major miners are also lower. Fortescue Metals is sliding more than 4 percent, Rio Tinto is losing more than 2 percent and BHP Group is declining almost 1 percent.

BHP will on Thursday face a parliamentary inquiry investigating the destruction of ancient heritage sites in Western Australia by its rival Rio Tinto.

Gold miners are mixed after gold prices edged higher overnight. Newcrest Mining is down 0.2 percent, while Evolution Mining is adding 0.3 percent.

In the oil sector, Oil Search and Santos are advancing more than 1 percent each, while Woodside Petroleum is adding 0.6 percent after crude oil prices rose sharply overnight.

Among the big four banks, National Australia Bank, Westpac and ANZ Banking are rising in a range of 0.2 percent to 0.8 percent, while Commonwealth Bank is lower by 0.5 percent.

In economic news, the Australian Bureau of Statistics said that the jobless rate in Australia came in at a seasonally adjusted 6.8 percent in August. That blew away expectations for 7.7 percent and was down from 7.5 percent in July.

The Australian economy added 111,000 jobs last month to 12,583,400, again shattering expectations that called for a loss of 50,000 jobs following the addition of 114,700 jobs in the previous month.

The Japanese market is modestly lower following the weak cues from Wall Street and as investors remained cautious ahead of the Bank of Japan's monetary policy decision due later in the day.

The BOJ is widely expected to keep its benchmark lending rate unchanged at -0.1 percent, although it may introduce other means of stimulus.

The benchmark Nikkei 225 Index is down 64.09 points or 0.27 percent to 23,411.44, after falling to a low of 23,321.34 earlier. Japanese stocks edged lower on Wednesday.

Market heavyweight SoftBank Group is edging up 0.1 percent, while Fast Retailing is declining 0.6 percent.

The major exporters are mixed on a stronger yen. Sony is adding almost 1 percent and Canon is edging up 0.1 percent, while Mitsubishi Electric is lower by 0.7 percent and Panasonic is down 0.2 percent.

Sony said it will launch the PlayStation 5 on November 12 in seven key markets, including Japan and the U.S.

In the tech space, Tokyo Electron is higher by 0.6 percent, while Advantest is unchanged. In the financial sector, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial are rising 0.5 percent each.

Hitachi said it is pulling out of a nuclear power plant project in Wales, citing a worsening investment environment due to the impact of COVID-19. Shares of Hitachi are adding 0.3 percent.

Among automakers, Honda is losing almost 1 percent, while Toyota is adding 0.2 percent. In the oil sector, Inpex is down 0.2 percent, while Japan Petroleum is adding 0.1 percent.

Among the other major gainers, Ajinomoto Co. is rising more than 4 percent, Kawasaki Kisen Kaisha is rising more than 3 percent and Mitsui OSK Lines is advancing almost 3 percent.

Conversely, Isuzu Motors is losing almost 4 percent, while East Japan Railway, West Jpan Railway and Central Japan Railway are all lower by more than 3 percent each.

In the currency market, the U.S. dollar is trading in the lower 105 yen-range on Thursday.

Elsewhere in Asia, Hong Kong is losing more than 1 percent, while Shanghai, South Korea, New Zealand, Taiwan and Malaysia are also lower. Singapore and Indonesia are little changed.

On Wall Street, stocks pulled back sharply in the final hour of trading on Wednesday after seeing strength for much of the session. The late-day pullback came despite a dovish monetary policy announcement by the Fed, with the central bank leaving interest rates unchanged and signaling rates are likely to remain at near-zero levels for years to come. The Fed announced its widely expected decision to keep the target range for the federal funds rate at zero to 0.25 percent.

While the Dow inched up 36.78 points or 0.1 percent to 28,032.38, the Nasdaq plunged 139.85 points or 1.3 percent to 11,050.47 and the S&P 500 slid 15.71 points or 0.5 percent to 3,385.49.

The major European markets ended mixed on Wednesday amid cautious trading. While the U.K.'s FTSE 100 Index slid by 0.4 percent, the French CAC 40 Index crept up by 0.1 percent and the German DAX Index rose by 0.3 percent.

Crude oil prices extended gains on Wednesday from the previous session, after data showed an unexpected drop in U.S. crude inventories in the week ended September 11. A sharp drop in U.S. offshore output due to the impact of Hurricane Sally further supported oil prices. WTI crude for October delivery jumped $1.88 or about 4.9 percent to $40.16 a barrel.

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