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Asian stocks slump, gold jumps after dovish Fed

Economy Aug 20, 2020 03:30AM ET
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2/2 © Reuters. Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai 2/2
 
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By Stanley White and Chibuike Oguh

TOKYO/NEW YORK (Reuters) - Asian equities and U.S. futures fell on Thursday, 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 1.79%, the biggest daily decline in five weeks. U.S. stock futures were down 0.55%.

Australian stocks dropped 0.91% 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 1.28% due to dwindling expectations for additional monetary easing after the People's Bank of China kept a benchmark lending rate unchanged on Thursday.

Japanese stocks slid 1.06%. South Korean stocks tumbled 3.26%, the biggest daily decline since June 15, amid a spike in coronavirus cases in Seoul.

Euro Stoxx 50 futures were down 1.36%, German DAX futures fell 1.31%, and FTSE futures was off 1.27%.

Market sentiment had been bullish up until Fed policymakers' comments highlighted uncertainties over the U.S. recovery, with the S&P 500 and the Nasdaq hitting all-time highs driven largely by Apple Inc (NASDAQ:AAPL)..

The iPhone maker's shares rose 1.4% to make the first publicly listed U.S. company reach $2 trillion in market capitalisation, while strong results from retailers Target (NYSE:TGT) and Lowe's (NYSE:LOW) 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 higher due to economic uncertainty.

"It was a decent day for banks, Apple, and Nike (NYSE:NKE) but everything else was in the reverse after the Fed said economic conditions will be difficult for a while," said Jamie Cox, managing partner at Harris Financial Group.

"We've seen some good numbers out of retail but there's uncertainty that these companies won't replicate those earnings without some stimulus."

Minutes from the Fed's July meeting 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.

The Dow Jones Industrial Average fell 0.31%, the S&P 500 lost 0.44% and the Nasdaq Composite dropped 0.57%.

Spot gold rose 0.82% to $1,945.43 per ounce on Thursday, recovering from a 3.6% tumble on Wednesday as the cautious mood boosted demand for the safe harbour asset. [GOL/]

The yield on benchmark 10-year Treasury notes fell slightly to 0.6623% while those on the 20-year bond also fell to 1.1725%.

Some bond investors were also disappointed after the Fed minutes showed central bankers downplayed the chance of capping bond yields.

The dollar index, which reflects the greenback's value against six leading trading currencies, steadied at 92.983.

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 0.77% to $45.02 a barrel. U.S. crude futures slid by 0.89% to $42.55 a barrel.

Asian stocks slump, gold jumps after dovish Fed
 

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Comments (9)
Matt Kay
Matt Kay Aug 20, 2020 8:11AM ET
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your robot writers are bugged
Asif Samma
Asif Samma Aug 20, 2020 3:53AM ET
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why spot gold is moving downward ? I m surprised why gold is moving down when dollar is weak ?
Mushahid Iqbal
Mushahid Iqbal Aug 20, 2020 2:36AM ET
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Hi Dollar 🤑
Ted Dirty
DirtyTed Aug 20, 2020 1:53AM ET
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Btw..who wrote this article??...the MSCI Pacific Ex Japan actually is +0.37%...
Ted Dirty
DirtyTed Aug 20, 2020 1:53AM ET
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..and the MIAPJ0000PUS is down indeed but only  -0.33%...these data are here on investing...
Ted Dirty
DirtyTed Aug 20, 2020 1:47AM ET
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Lol..."gold jumps"...gold is actually down ..-1%...so what does it mean "jumps"??..
Edward Chong
Edward Chong Aug 20, 2020 1:47AM ET
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gold rebound from the low. if u are keen on picking up matters from them. why dont u try them an email?
Ted Dirty
DirtyTed Aug 20, 2020 1:23AM ET
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If u read the FED minutes release, you will find that is almost the opposite what the biased media lies...
Dwi Randhy
Zenwave Aug 20, 2020 1:23AM ET
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yes , so ambigu , i got confuse too
Ted Dirty
DirtyTed Aug 20, 2020 1:19AM ET
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You better read yourself the Fed minutes release...not from the media interpretation...https://www.federalreserve.gov/monetarypolicy/fomcminutes20200729.htm
Thom Miller
Thom Miller Aug 19, 2020 10:49PM ET
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Just heard President Obama give the best speech of a generation....and then some. He makes Trump sound like an 8-year old when ever he steps to the podium. And then look below to see the insightful comments Trump’s followers put on this board. Disgusting!
John Miller
John Miller Aug 19, 2020 10:49PM ET
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silver tounge devil
Thom Miller
Thom Miller Aug 19, 2020 10:49PM ET
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John Miller Thanks, Dad!
Angus Malarkey
Angus Malarkey Aug 19, 2020 10:49PM ET
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"Disgusting." LMAO...drama queen
Aug 19, 2020 10:49PM ET
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Yawnnnnn
Plopseven Schwartz
Plopseven Schwartz Aug 19, 2020 10:49PM ET
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eddie glass The fact that you’ve posted 10x more than anyone else on these boards tells me you are absolutely terrified.
Matthew VS
Matthew VS Aug 19, 2020 9:55PM ET
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Wall Street living and dying on promises of government welfare. The Fed hands out checks and the market goes up. No checks and the market falls flat. I thought we traded on the actual performance of businesses and not government handouts. I'm also not particularly thrilled about the fact that the fed can say what ever it wants to make the market shift in the direction that they want it to go. Not fair.
Plopseven Schwartz
Plopseven Schwartz Aug 19, 2020 9:55PM ET
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A vote for Trump is a vote for a market dependent on corporate socialism, a ballooning deficit and class revolution-spurring income inequality. A vote for Biden is a sharp selloff (which you can still profit from, you know) followed by sustainable markets in the future, and a return to actual TA & DD. Go back to your scratchers if you want Trump’s markets.
Frag Carole
Frag Carole Aug 19, 2020 9:55PM ET
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Trump does'nt control the capital markets
Ed Glass
EddieG Aug 19, 2020 9:55PM ET
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Republicans are champion of crony capitalism and corporate welfare.
 
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