US Federal Reserve rate cut stokes rather than soothes fears over the coronavirus outbreak
Singapore — Asian shares struggled to find footing on Wednesday and bonds held stunning gains, as an emergency rate cut from the US Federal Reserve seemed to stoke rather than soothe fears over the coronavirus’ widening global economic fallout.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4% amid choppy trade across the region, though most of the gains were confined to South Korea. Japan’s Nikkei oscillated between flat and modest gains. Australia’s S&P/ASX 200 index fell 1.5%, while stocks in Hong Kong and China traded flat. Korean stocks bucked broader weakness, rising 2% after the government announced a stimulus package of 11.7-trillion won to mitigate the impact of the virus outbreak.
“They’re a bit worried that interest rate cuts are not going to make a massive difference ... and what’s going to be required is probably going to be more fiscal stimulus,” he said, his fund having invested, for example, in Chinese cement and construction stocks in anticipation of more government support measures.The Fed’s surprise move — its first off-schedule cut since the depths of the financial crisis more than a decade ago — followed a huge shift in money market pricing.
The remark sent Wall Street from positive territory into the red. Dow Jones Industrial Average, Nasdaq composite and S&P 500 each closed down close to 3%. “The question here is whether a conventional interest rate response is sufficient,” said Sameer Goel, chief strategist, Asia macro, at Deutsche Bank in Singapore.
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