Asian markets retreat as Fed envisions staying put for the next few years

Stocks pull back in Tokyo, Hong Kong, Shanghai

Asian stock markets declined Thursday after the U.S. Federal Reserve indicated its benchmark interest rate will stay close to zero at least through 2023 but announced no additional stimulus plans.

The Shanghai Composite Index SHCOMP, -0.41% lost 1% and the Nikkei 225 NIK, -0.66% in Tokyo sank 0.7%. The Hang Seng HSI, -1.58% in Hong Kong retreated 1.8%.

The Kospi 180721, -1.22% in Seoul shed 1.4% while Sydney’s S&P/ASX 200 XJO, -1.22% declined 1.1%. Stocks in New Zealand NZ50GR, -0.31%, Taiwan Y9999, -0.80%, Indonesia JAKIDX, -0.72% and Singapore STI, -0.23% retreated as well.

Wall Street’s benchmark S&P 500 index closed down 0.5% after the Fed said it won’t raise interest rates until inflation reaches 2%, which the U.S. central bank’s own projections show it doesn’t expect until late 2023.

Chairman Jerome Powell promised the Fed “we will not lose sight of the millions of Americans that remain out of work” but gave no indication of new stimulus. Markets “hoped for the Fed to put policy money where the mouth is” but “ended up a tad disappointed,” Mizuho Bank said in a report. The Fed was “long on talk and short on action.”

Global markets have recovered most of this year’s losses, boosted by central bank infusions of credit into struggling economies and hopes for a coronavirus vaccine. Forecasters warn, however, that the recovery might be too big and fast to be supported by uncertain economic activity.

U.S. investors are counting on Congress for a new support package after additional unemployment benefits that help to support consumer spending expired, but legislators are deadlocked on its possible size. The S&P 500 SPX, -0.46% declined to 3,385.49. The Dow Jones Industrial average DJIA, +0.13% rose 0.1%, to 28,032.38. The Nasdaq composite COMP, -1.25% lost 1.3% to 11,050.47.

Powell said the U.S. economy has recovered more quickly than The Fed forecast the economy will shrink 3.7% this year, an improvement over its June outlook of a 6.5% drop. The Fed projected an unemployment rate at the end of the year of 7.6% instead of the 9.3% projected in June.

“A full economic recovery is unlikely until people are confident that it is safe to re-engage in a wide variety of activities,” Powell said.

In energy markets, benchmark U.S. crude oil for October delivery CLV20, -1.27% lost 28 cents to $39.88 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.88 on Wednesday to $40.16. Brent crude oil for November delivery BRNX20, -1.09% shed 22 cents to $42 per barrel in London. It gained $1.69 the previous session to $42.22.

The dollar USDJPY, -0.15% edged down to 105.04 yen from Wednesday’s 105.01 yen.

This article was originally posted on MarketWatch.

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