Asia: Stocks struggle for direction after Fed hints at possible December hike

Asian equity markets struggled for direction on Thursday, as investors analysed the US Federal Reserve’s decision to leave the door open for an interest rates raise in December.

On Wednesday, the Fed decided to keep interest rates unchanged at 0.25%, as most analysts' expected, and left the door open to an increase in December.

The US central bank downplayed global economic headwinds in its statement on the decision, which was made after a two-day policy meeting, saying that it was monitoring developments abroad.

”Although we didn't think the Fed would take a December hike off the table, it was a surprise for them to warn the market so explicitly that a rate rise was a distinct possibility at their next meeting,” said analysts at Deutsche Bank.

“The Fed think financial conditions have calmed enough for them to try to prepare markets for their long desired hike.

“Whether this eventually causes the same cycle of risk-off again is the big question.”

Earlier this month, Asian markets had rallied in the hope the US central bank would keep rates unchanged for longer, but the change of policy highlighted on Wednesday dragged most stocks lower across the region.

Hong Kong’s Hang Seng declined 0.60%, while Australia’s S&P/ASX 200 and South Korea’s Kospi declined 1.28% and 0.41% respectively.

However, Japan’s Nikkei Stock Average and China’s Shanghai Composite Index both bucked the trend.

The former closed up 0.17% as investors awaited Friday’s highly-anticipated meeting of the Bank of Japan.

Among individual stocks, Nintendo tumbled 8.97% after revealing its first mobile app will be introduced in March 2016, rather than at the end of this year as originally planned.

Tech giant Sony rose 1.29% after it swung to a second quarter profit, as strong demand for its PlayStation 4 console drove sales higher.

Meanwhile, China’s mainland benchmark rose 0.36%, after rumours suggested Beijing authorities may lower its long-term target for gross domestic product growth to 6.5% per year from the current 7%.

“The Chinese economy is expanding markedly slower than the official figures claim,” said analysts at Capital Economics.

“However, it remains consistent with our view that, after slowing sharply at the start of the year, growth has since remained broadly stable.”

On the currencies front, the yen gained 0.20% against the dollar, while the Malaysian ringgit and the Indonesian rupiah slid 0.5% and 0.8% respectively against the greenback, after the US currency rallied in the aftermath of the Fed announcement.