Asia report: Markets mixed after Fed, RBNZ rates decisions

Markets in Asia finished mixed at the end of a turbulent session on Thursday, as investors digested the news that the Federal Reserve had raised interest rates in the US for the first time this year, as expected.

In Japan, the Nikkei 225 was up 0.99% at 21,591.99, as the yen strengthened 0.65% against the dollar to last tradea t JPY 105.36.

Stocks in Tokyo were led by the country’s mining and oil sectors, which were ahead 4.56% and 3.06% respectively.

On the mainland, the Shanghai Composite lost 0.52% to 3,263.83, and the smaller, technology heavy Shenzhen Composite slipped 0.49% 1,849.60.

The losses in China came after reported that the People’s Bank of China had increased the interest rate on its seven-day reverse repurchase agreements by five basis points.

It came after the Fed rate hike overnight.

South Korea’s Kospi was up 0.44% at 2,496.02, while the Hang Seng Index in Hong Kong fell 1.09% to 31,071.05.

Losses in manufacturing were offset by gains among broker firms and the oil sector on the Korean peninsula.

Blue-chip technology giant Samsung Electronics also contributed to the positive performance, finishing the day up 1.41%.

Attention at the start of the Asian day was fixed across the Pacific Ocean at the US Federal Reserve, which satiated market expectations overnight by raising its interest rate target by 25 basis points to between 1.5% and 1.75%.

The central bank suggested it was still anticipating another two rate rises this year, and upgraded its forecast for the benchmark rate in 2019 to reach 2.9%.

It also upgraded its growth forecasts for 2018 and 2019.

“[The FOMC wants] to strike a balance between showing a need for more rate hikes in the long term, [without] rocking market sentiment too much with the median for 2018 staying at three hikes,” noted JP Morgan Asset Management chief Asia Pacific market strategist Tai Hui.

Following the rate hike in the US, and in addition to the increase in reverse repo rates in China, the Hong Kong Monetary Authority also raised its base rate by 25 basis points.

That was a necessity of the Hong Kong dollar being pegged to its US counterpart.

Oil prices were on the back foot as the region went to bed, having surged earlier in the session, with Brent crude last down 0.92% at $68.84 per barrel and West Texas Intermediate off 0.88% at $64.60.

In Australia, the S&P/ASX 200 was off 0.22% at 5,937.20, with losses seen across almost all sectors, with energy, gold and materials being the only subindices to finish in the green.

The major miners were the big winners of the day, while oil producers saw steady gains after a solid improvement for crude prices overnight.

Beach Energy finished up 2.78% and Woodside Petroleum was 2.22% higher.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 0.09% at 8,600.81, led lower by Heartland Bank, which was down 2.2%.

The Reserve Bank of New Zealand kept the country’s official cash rate on hold at 1.75% early in the day, signalling to markets that the rate would remain low for some time yet due to a lack of inflationary pressure.

“Monetary policy will remain accommodative for a considerable period,” said acting Reserve Bank governor Grant Spencer.

“Numerous uncertainties remain and policy may need to adjust accordingly.”

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.71% at AUD 1.2969, and the Kiwi retreating just 0.01% to NZD 1.3835.