Stocks in Asia mixed as Fed opens door for potential rate cut; 10-year Treasury drops below 2%

  • Shares in Asia Pacific were mixed in morning trade.
  • The closely watched 10-year Treasury yield fell below 2% in the morning of Asian trading hours, its lowest levels since November 2016.
  • Overnight stateside, the Fed left interest rates unchanged at its monetary policy meeting, dropped the word"patient" from its statement and said it would "act as appropriate" to sustain the economy.
  • Meanwhile, on the U.S.-China trade front, hopes in Beijing appear to have risen for a trade deal between the two economic powerhouses.

Stocks in Asia were mixed in Thursday morning trade after the U.S. Federal Reserve left interest rates unchanged overnight but opened the door to a potential rate cut on the horizon.

In Japan, the Nikkei 225 rose 0.55% in early trade, while the Topix gained 0.45% as most sectors traded higher.

Over in South Korea, the Kospi slipped 0.14% as shares of automaker Hyundai Motor declined 0.36%.

Australia's S&P/ASX 200 was largely flat as majority of the sectors saw gains.

Asia-Pacific Market Indexes Chart

Overnight on Wall Street, the Dow Jones Industrial Average added 38.46 points to close at 26,504, while the S&P 500 rose 0.3% to finish its trading day stateside at 2,926.46. The Nasdaq Composite advanced 0.4% to close at 7,987.32.

The moves came as the Fed left interest rates unchanged at its monetary policy meeting, in line with expectations. The U.S. central bank did, however, drop the word word"patient " from its statement and said it would "act as appropriate" to sustain the economy.

The Fed's rate projections showed that eight Fed members see a cut this year, which traders took as a further sign the central bank was close to cutting rates. Its median forecast, however, still reflected no cuts this year, but additional easing in 2020.

Fed Chair Jerome Powell also said that some Fed officials believed the case for easier monetary policy had strengthened.

Following the Fed's statement, the closely watched 10-year Treasury yield steadily slipped, and during Asian trading hours fell below 2% for the first time since November 2016.

Meanwhile, on the U.S.-China trade front, hopes in Beijing appear to have risen for a trade deal between the two economic powerhouses.

U.S. President Donald Trump and Chinese Xi Jinping are set to meet at the upcoming G-20 summit in Japan, which will happen next week. Trump said talks between the"respective teams" would begin prior to that.

"Although the Fed partiality has shifted from a wait and see mode to an easing bias, the fact that trade uncertainty and its impact on global growth has been the main catalyst for its change in stance, means that a new round of Fed easing is largely contingent on the outcomes from (the) upcoming G20 meeting between President Trump and Xi," analysts at National Australia Bank wrote in a note.

"For now though, the change in the Fed's bias has encouraged the market to increase its expectations that a new round of easing is just around the corner," they wrote.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.188 after slipping from levels above 97.6 yesterday.

The Japanese yen traded at 108.01 against the dollar after touching levels around 108.6 in the previous session, while the Australian dollar changed hands at $0.6887 after trading mostly between $0.685 and $0.690 yesterday.

Oil prices jumped in the morning of Asian trading hours, with the international benchmark Brent crude futures contract up 1.34% to $65.65 per barrel, while U.S. crude futures gained 1.38% to around $54.50 per barrel.

— CNBC's Fred Imbert contributed to this report.

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