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Most Asian stocks fall as Fed holds rates; Japanese shares slide

Friday, September 18, 2015 - 08:25
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[TOKYO] Most Asian stocks fell as the Federal Reserve's decision not to raise interest rates fueled concerns about the strength of the global economy. Japan's Topix index retreated.

About two shares dropped for each that climbed on the MSCI Asia Pacific Index, which traded little changed at 129.39 as of 9:03 am in Tokyo. The measure is heading for a 1.6 per cent gain this week. US rates will remain near zero for at least another month after the Fed's decision, which showed policy makers are reluctant to end record monetary stimulus at a time when uncertainty over China and other developing nations is whipsawing global markets. Odds of an increase this year have fallen below 50 per cent, with Fed Chair Janet Yellen saying the recent turmoil may restrain the US economy and suppress already slow inflation.

"The reality is that the rate hike is still going to come, whether it's before the end of the year or in 2016," Tai Hui, the Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about US$1.7 trillion, told Bloomberg TV in Hong Kong. "So I don't believe we've cleared anything." Japan's Topix lost 0.9 per cent as the yen weakened 0.1 per cent against the dollar. South Korea's Kospi index fell 0.1 per cent. Australia's S&P/ASX 200 Index was little changed. New Zealand's S&P/NZX 50 Index added 0.3 per cent. Markets in China and Hong Kong have yet to start trading.

China's Shanghai Composite Index slipped 2.1 per cent on Thursday as the benchmark gauge posted its biggest price swings since 1997. Volatility has surged amid concern government intervention will fail to shore up the world's second-largest stock market as signs grow the economic slowdown is deepening. A weekend report showed industrial output missed economists' estimates, while fixed-asset investment in the first eight months increased at the slowest pace since 2000. Data on August property prices are due today.

E-mini futures on the Standard & Poor's 500 Index slipped 0.1 per cent. The underlying US equity benchmark gauge dropped 0.3 per cent on Thursday.

Ms Yellen said most Fed officials still expect a rate increase this year and that the US economy is performing well. She reinforced that the path of rate rises would be gradual. Odds of a hike in October are now at 19 per cent, and bets on one in December have slumped to 46.6 per cent, from 59 per cent a week ago, according to fed funds futures.

"Yellen kept referring to the strong dollar and turmoil offshore, those were the main issues," Mark Lister, head of private wealth research at Craigs Investment Partners Ltd in Wellington, which manages about US$7.2 billion, said by phone. "They probably have taken a little bit more notice of what's happening overseas, in China and emerging markets, than some people might have expected. Every meeting is going to be considered live from now on, but it's looking like a better than even chance that it's next year's story."

BLOOMBERG