Stocks slip on uncertainty over future Fed policy - Financial Times

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Stocks in the Asia-Pacific region followed Wall Street lower on Thursday after the US Federal Reserve indicated it had no immediate plan to take unconventional measures to support market stability.

Japan’s Topix index fell 0.8 per cent while Australia’s benchmark S&P/ASX 200 lost 0.9 per cent. South Korea’s Kospi dropped 2.9 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 1 per cent and Hong Kong’s Hang Seng slipped 1.9 per cent.

In Taiwan, shares plunged for electronics components suppliers, taking the Taiex index as much as 5 per cent lower following a Nikkei Asian Review report that Chinese telecoms groups Huawei and ZTE had slowed their rollout of 5G installations in China.

The S&P 500 ended down 0.4 per cent on Wednesday. The US stock benchmark has staged a sharp rebound in recent months despite signs of continued economic damage from the pandemic. On Tuesday it notched a record closing high, wiping out the entirety of losses incurred earlier in the year.

But Thursday’s fall in Asian stocks came after the release of minutes from the Federal Open Market Committee’s late July meeting noting that uncertainty over the path of the economy was “very elevated”, with fiscal support waning.

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The minutes offered nothing to those hoping for more unconventional measures to maintain loose financial conditions — such as explicit guidance on the future path of the federal funds rate or yield curve control, in which policymakers set targets for certain Treasury yields.

“Many participants judged that yield caps and targets were not warranted in the current environment but should remain an option that the committee could reassess in the future if circumstances changed markedly,” the minutes said.

Futures tipped US stocks to lose further ground when Wall Street opened later in the day, with the S&P 500 expected to drop 0.6 per cent. The FTSE 100 was expected to shed 1.3 per cent.

“Officials are worried about the potential costs of yield curve control,” said James Knightley, chief international economist at ING. “However, should yields start to rise more significantly . . . pushing up mortgage rates and corporate borrowing costs, this option could be up for more discussion.”

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Stocks slip on uncertainty over future Fed policy - Financial Times
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