· Stocks dropped on Wednesday as Federal Reserve Chairman Jerome Powell dampened hopes for further rate cuts later this year.
The Dow Jones Industrial Average closed 333.75 points lower, or 1.2%, at 26,864.27 after falling as much as 478 points at one point. The S&P 500 slid 1.1% to close at 2,980.38. The Nasdaq Composite fell 1.2%to 8,175.42. The Dow logged its biggest one-day decline since May 31 along with the S&P 500. The Nasdaq had it biggest one-day drop since late June.
“The stock market seemed disappointed with Powell’s performance, perhaps because while Powell did not suggest this was a ‘one-and-done’ cut, there was no overt messaging that a September cut is guaranteed,” said Don Ellenberger, senior portfolio manager at Federated Investors.
The Fed cut rates by 25 basis points, matching market expectations. The central bank cited “global developments ” along with “muted inflation” as reasons for easing monetary conditions.
· European stocks closed higher Wednesday as investors awaited an interest rate decision from the U.S. Federal Reserve.
The pan-European Stoxx 600 climbed 0.2%, with the majority of sectors and major bourses in positive territory. The FTSE 100 in London was the outlier in Europe, slipping 0.6% as the pound moved away from recent lows.
· Asia Pacific markets traded lower Thursday morning as major South Korean technology names came under pressure.
The benchmark Kospi slipped 0.5% as major chipmakers sold off in early trade: Samsung shares dropped 0.88% while SK Hynix fell 0.78%.
South Korean trade data for July showed exports falling 11% year-on-year. That was lower than expectations of an 11.3% drop in a Reuters poll.
Elsewhere, Japan’s Nikkei 225 slipped 0.96% in early trade while the Topix index shed 0.68%. Australia’s S&P/ASX 200 shed 0.44%, as most of the sectors traded lower.
The MSCI Asia ex-Japan index declined 0.4%.
· The Thai baht has soared against the U.S. dollar this year, significantly more than many other emerging market currencies. That strength, however, is sparking concerns as the country’s domestic economy weakens, analysts said.
Since the beginning of this year, Thailand’s currency has jumped more than 5% against the dollar. On a year-over-year basis, it has bounded even higher — nearly 8%.
The strength of the baht has been supported by Thailand’s large trade surplus and a hawkish central bank, among other factors.
”(The) strong currency is worsening the (Thai) economy’s plight by hurting exports further,” Prakash Sakpal, Asia economist at Dutch bank ING, tells CNBC.
The country’s central bank could give in to pressure and cut rates to curb the rising baht, economists say.
“The (Bank of Thailand) could consider a rate cut to help reduce the baht’s yield appeal, but it will be no panacea,” DBS analysts said in their note, adding that a cut of 25 basis points would just undo a hike by the central bank last December.
ING’s Sakpal similarly said that any cut would see limited results.
Reference: CNBC
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