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Asia stocks slide on US Fed rate rise

Thursday 03.10 BST

Overview

The US Federal Reserve’s decision to raise interest rates and a drop in crude prices hit Asian equities, while the Australian dollar rallied on news of a better-than-expected increase in employment.

Hot topic

Stocks were down across all major markets in Asia as the Fed’s rate rise and tumbling oil prices hit financial and energy equities.

The S&P/ASX 200 was down 1.4 per cent in Sydney as materials stocks dropped 2.5 per cent, pulled down by heavyweights such as BHP Billiton, which was down 2.7 per cent. Energy stocks fell 2.5 per cent, while financials were 1.7 per cent lower.

In Tokyo the Topix index was 0.5 per cent lower as the energy segment fell 1.7 per cent and financials shed 1.4 per cent. Shares in Toshiba fell as much as 5.8 per cent as Western Digital announced it was seeking an injunction to block the sale of the company’s memory chip unit.

Hong Kong’s Hang Seng index was down across the board after the territory’s de facto central bank raised its baseline interest rate to match the move from the Fed and preserve the Hong Kong dollar’s currency peg.

The headline index dropped 0.9 per cent thanks to 1.5 per cent falls in real estate and energy stocks, with state-owned China oil heavyweights such as Sinopec down as much as 1.7 per cent. Real estate stocks were down 1.5 per cent, while the consumer discretionary segment dropped 2 per cent on losses by casino stocks including Galaxy Entertainment, down 2.5 per cent.

Forex

The Australian dollar led gains in the region with a rise of half a per cent against its American counterpart to $0.7619 after data showed new employment rising by more than four times the expected amount in May.

The New Zealand dollar was off 0.4 per cent at $0.7236 following first-quarter gross domestic product growth that came in lower than expected thanks to an 11 per cent fall in milk exports, a key driver of outbound shipments.

South Korea’s won was down 0.1 per cent at Won1,124.58 per dollar, while the yen was basically flat at ¥109.55.

The dollar index tracking the greenback against a basket of peers was flat at 96.921.

Fixed income

Sovereign bonds in Asia Pacific were up across the board, notwithstanding the Fed’s decision to raise interest rates.

Yield, which moves inversely to price, on 10-year Australian government bonds was down 5 basis points at 2.347 per cent, while that on the equivalent New Zealand government note was also 5bp lower at 2.722 per cent.

The 10-year Japanese government bond saw yield drop 1bp to 0.047 per cent as yield on South Korea’s 10-year sovereign bond fell 4bp to 2.122 per cent.

Yield on 10-year US Treasuries recovered slightly Thursday from a Wednesday drop of 9bp, which came as traders reacted to weak US inflation numbers that preceded the Fed decision. US Treasury yields rose 1bp on Thursday to 2.134 per cent.

Commodities

Crude oil prices were down slightly in Asia after diving on Wednesday in response to data showing US gasoline inventories unexpectedly rose and crude stockpiles fell less than expected last week.

Brent crude, the international benchmark, was down 0.1 per cent at $46.95 a barrel after a drop of 3.5 per cent during the previous session. West Texas Intermediate, the US marker, was off 0.2 per cent at $44.64 following a previous close down 3.7 per cent.

Gold was up 0.4 per cent at $1,265.49 per ounce.

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