Shares across Asia-Pacific slipped following a choppy session on Wall Street, as the US central bank’s pledge to keep interest rates low for years to come failed to boost investors.
China’s CSI 300 of Shanghai- and Shenzhen-traded stocks dropped 0.8 per cent on Thursday and Hong Kong’s Hang Seng fell 1.4 per cent. Japan’s Topix benchmark shed 0.5 per cent while Australia’s S&P/ASX 200 and South Korea’s Kospi index were both down 1 per cent.
On Wednesday, Wall Street’s S&P 500 slid 0.5 per cent and the technology focused Nasdaq Composite lost 1.3 per cent following a rocky session.
Futures tipped the S&P 500 to fall 1 per cent when US markets open later on Thursday, while London’s FTSE 100 was on track to drop 0.6 per cent.
The losses came despite the US Federal Reserve projecting that it would not increase interest rates until at least the end of 2023, signalling ultra-loose monetary policy would remain in place for years.
The Fed’s new average inflation target of “moderately above 2 per cent”, also announced on Wednesday, reflects a more dovish regime than its previous approach. The Fed’s rate-setters said they would “maintain an accommodative stance” until that target was hit.
Some investors had hoped that the central bank would do more to buttress growth, as the US Congress struggles to pass its own package of fiscal support measures against a backdrop of the coronavirus pandemic.
“Given that it will take some time for the average rate of inflation to be above the Fed’s 2 per cent target, there may be increasing calls for the Fed to do more,” said Kerry Craig, global markets strategist at JPMorgan Asset Management. “The onus on creating growth and inflation does really fall to fiscal policy and the bipartisan politics in Washington means that a new stimulus package may not eventuate until the new year.”
The Fed said it now expects the US economy to contract by 3.7 per cent this year, compared with a forecast decline of 6.5 per cent previously. However, data on Wednesday showed that US retail sales growth slowed in August, underscoring the uneven nature of the economic recovery from Covid-19.
The Bank of Japan kept interest rates unchanged on Thursday, while investors are also looking ahead to a monetary policy decision from the Bank of England.