Investors surprised by 'more hawkish' outlook; slump in crude weighs oil stocks
Asia-Pacific stocks were lower as investors took profits, after a muted reaction in U.S. markets to the Federal Reserve's rate rise and plan to start shrinking its balance sheet.
Following earlier gains, stocks in Australia, Hong Kong and South Korea were down nearly 1% in Thursday morning trading.
As expected, the Fed raised its benchmark policy rate for the third time in six months on Wednesday and provided details on when it would start shrinking its $4.5 trillion portfolio of bonds and other assets.
But some investors were caught off guard because policy makers stuck to prior predictions for the pace of rate increases through 2018.
The Fed came off "more hawkish than what people were anticipating," said Chris Weston, chief market strategist at IG Markets in Melbourne. Policy makers are "still seeing a glass-half-full scenario" on inflation, he added.
On Wednesday, a U.S. consumer-inflation reading came in weaker than expected and raised fresh questions about the pace of price increases. Soft inflation was among the factors which slowed or prevented previous monetary tightening steps in the U.S. In addition, May retail sales in the U.S. were weak.
Australian stocks were the worst performers early Thursday, with the S&P/ASX 200 down 1% after having logged its largest four-session run of gains this year.
The Australian market was also affected by the expiration later today of derivative contracts and late-Wednesday data that showed a slowdown in Chinese credit growth, said Michael McCarthy, chief market strategist at CMC Markets in Sydney. Commodity companies took a hit; Rio Tinto (RIO) and BHP Billiton (BHP.AU) were both down 3%.
Meanwhile, the overnight slump in crude prices following bearish U.S. inventory data pushed Santos (SSLTY) and Oil Search (OSH.AU) down about 4%. Oil futures were little changed in Asia after a near 4% drop Wednesday.
In Hong Kong, Sinopec (600028.SH) , and Cnooc (0883.HK) declined more than 1.5% while Japan Petroleum (1662.TO) and Inpex (1605.TO) fell around 1%. Benchmarks in Hong Kong and Korea were down 0.9% and 0.6%, respectively.
The muted U.S. data Wednesday pressured sovereign-debt yields worldwide. The 20-year Japanese yield was down a slightly at 0.56%.
The Nikkei Stock Average dropped 0.4% following an overnight selloff in the U.S. dollar. The dollar was recently around Yen109.55 versus Yen110.30 before the data was released.
(END) Dow Jones Newswires
June 14, 2017 23:20 ET (03:20 GMT)