Disappointment at the US Federal Reserve's modest 25 basis point cut in interest rates dented Asian stocks yesterday, but expectations of further Fed action helped limit losses and boosted demand for government bonds.
Base metals fell with zinc hitting its downside limit in Shanghai, while oil slipped toward US$89 a barrel as investors fret that slower economic growth would hurt demand. Gold steadied above US$800 an ounce after Tuesday's fall.
US Fed Chairman Ben Bernanke and all but one of his colleagues agreed to trim the federal funds rate by a quarter of a percentage point to 4.25 percent on Tuesday, disappointing many who had expected a bolder half-point move to help cushion the world's biggest economy from a deep housing slump and tight lending conditions.
The rate reduction, the third this year, was needed to energize US economic growth, Fed officials said.
``Economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks,'' the Fed said in a statement explaining its decision to cut rates again.
The 9-1 decision for a quarter-point reduction to the funds rate was opposed by Eric Rosengren, president of the Federal Reserve Bank of Boston. He preferred a bolder, half-percentage point cut.
"The Fed's language clearly reflects a heightened degree of concern about the economic outlook," said Carl Tannenbaum, chief economist at LaSalle Bank. "They left open the possibility of additional rate reductions."
If the economy were to take a turn for the worse, another rate cut could come before the Fed's next scheduled meeting on Jan. 29 to Jan. 30, Tannenbaum predicted.
Asian stocks fell sharply at first yesterday, but later pared losses as investors bet there would be more Fed cuts in the months ahead. The majority of Wall Street dealers expect another rate cut next month, a Reuters poll found.
"There's a sense that the Fed could move again in January, which is giving the market some support," said Takahiko Murai, equities general manager at Nozomi Securities.
Tokyo's Nikkei average ended down 0.7 percent, after falling as much as 2.1 percent, while MSCI's measure of other Asia Pacific stocks shed about 1.6 percent by 0611 GMT.
The Asia Pacific index is down 8.5 percent from the Nov. 1 peak, but still up 36.2 percent this year, outstripping an 11.6 percent rise for MSCI's key world stock index
Already buoyed by flight to safety, safe-haven government bonds rose further as the market priced in easier monetary policies, pushing yields lower.
The yield on the benchmark 10-year JGB dropped 6.5 basis points to 1.515 percent. US Treasuries paused in Asia after posting their biggest rally in more than three years on Tuesday after the Fed decision.
Financial stocks were off their lows, with some ending slightly firmer on hopes of more rate cuts.
Australia's top investment bank Macquarie Group and South Korea's Shinhan Financial Group both fell more than 1 percent, but Kookmin Bank ended flat while National Australia Bank climbed 0.6 percent.
South Korean stocks were helped by rumors, later confirmed, that the government was buying local shares in the market.
Exporters or firms with large exposure to the US economy also pared early losses, but still remained pressured on lingering worries about the health of the region's top export destination.
The yen held on to most of the gains made overnight but was off its best levels as stock markets bounced off their lows.
The dollar popped back above ?111 but was still off Tuesday's high above ?112, while the euro rose above ?163 -- still some distance away from the previous session's peak near ?165.
Investors tend to sell the low-yielding yen to fund purchases of riskier assets and reverse those trades in times of heightened risk aversion.
Tohru Sasaki, chief foreign exchange strategist for Japan at JPMorgan Chase in Tokyo, said stock markets were likely to stay volatile as the year winds down and could prompt a further unwind of carry trades.
"In broad terms, there are still huge carry trades," Sasaki said.
"If markets are volatile and stock markets decline, there is more room for the yen to appreciate," Sasaki said.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary