Asian Markets Shrug off Fed Decision but Japanese Shares Hit Hard

Asian shares recover from early losses but Japan’s Nikkei takes about a 1-percent hit.

Asian shares outside Japan mostly rebounded early Friday. (Photo: Reuters)

Asian shares outside Japan mostly rebounded early Friday, recovering from early losses after the Federal Reserve cited concerns about global economic growth in its decision to hold off on its first rate hike in nearly a decade.

In the grand scheme of things, the decision by the Fed to leave rates unchanged is indicative that the global economy and the US economy is performing worse than previously projected.
— Angus Nicholson, Market Analyst, IG

Japan’s Nikkei lost 1.5 percent and the broader Topix index were among the hardest-hit, down more than 1 percent early Friday. Other markets in Asia, however, were in the flat-to-positive territory.

Major Wall Street indexes gave up a 1 percent rally to end lower, with the S&P 500 index losing 0.3 percent.

Fed Chair Janet Yellen said the outlook abroad has appeared to become less certain, adding that recent falls in US stock prices and a rise in the value of the dollar already were tightening US financial market conditions.

Yellen said she wanted to see more improvement in the US labour market and expressed concern over weak inflation.

Referring to the global outlook, Yellen explicitly said the central bank was focusing on the slowdown in China and emerging markets, saying one key issue is whether there might be a risk of a more abrupt slowdown in China.

The Fed’s decision to keep rates at zero could give some relief to emerging markets, which have long suffered capital outflows on expectation of higher US rates.

But trade-reliant Asian economies are likely to remain under pressure as China’s economy slows.

As the prospects of higher interest rates down the road had been a major attraction for the dollar, the US currency was wobbly against many other currencies.

The dollar index against a basket of major currencies was little changed at 94.559 on Friday, having fallen to three-week low of 94.360 on Thursday.

(With inputs from Reuters)