Asian markets close mixed ahead of Federal Reserve policy decision
The widely anticipated trading debut of SoftBank Corp, the mobile unit of Japanese conglomerate SoftBank Group, ended in disappointment. The company’s shares closed 14.5 percent lower than its initial public offering price of 1,500 yen ($13.36). It was the most heavily-traded stock on the Tokyo Stock Exchange.
SoftBank Corp’s 2.65 trillion yen ($23.6 billion) IPO is the largest ever in Japan and the second-largest in the world behind Alibaba’s $25 billion IPO in 2014.
“I’m not 100 percent surprised that it’s down this much. If they’d been able to hold above that 1,500-level (IPO price), it could have been a different story,” said Andrew Jackson, head of Japanese equities at SooChow CSSD Capital Markets Asia.
“Once it dipped below it, a lot of these retail investors, first-time investors who don’t really know much about the markets, are probably in a big hurry to get out,” Jackson told CNBC’s “Street Sign,” noting that around 90 percent of those that subscribed to SoftBank Corp’s IPO were retail investors.
In the broader Japanese market, the Nikkei 225 finished the day 0.6 percent to 20,987.92 and the Topix closed 0.41 percent down to 1,556.15.
Asia-Pacific Market Indexes Chart
|NIKKEI||Nikkei 225 Index||NIKKEI||20987.92||-127.53||-0.60|
|HSI||Hang Seng Index||HSI||25865.39||51.14||0.20|
|ASX 200||S&P/ASX 200||ASX 200||5580.60||-8.90||-0.16|
|CNBC 100||CNBC 100 ASIA IDX||CNBC 100||7338.60||3.21||0.04|
Shares of top Chinese oil firms fall following the plunge in oil prices overnight. Petrochina shares fell 3.28 percent in Hong Kong and 2.1 percent in Shanghai. Shares of China Petroleum and Chemical Corp slipped 4.85 percent in Hong Kong and 2.75 percent Shanghai.
Energy stocks in Australia were also mostly lower. Origin Energy tumbled by 5.69 percent at the close, while Woodside Petroleum fell by 1.82 percent. The ASX 200 slipped by 0.16 percent to 5,580.6 at the end of Wednesday’s trading session.
South Korean stocks, meanwhile, ended the session higher with the Kospi index rising 0.81 percent to 2,078.84.
One widely watched event coming on Wednesday in the U.S. is the monetary policy decision by the Federal Reserve. The central bank is expected to hike its benchmark overnight lending rate for a fourth and final time in 2018, and its outlook for 2019 will also be scrutinized by investors.
“The key for me is not whether they hike or don’t hike, I’d be very surprised if they pause ... the question is what do they convey about the path moving forward. Do they lower the dot projection from three to two or is it even more dovish than that? So the story really isn’t about the December hike, it’s what 2019 and critically what 2020 looks like,” Frances Donald, head of macroeconomic strategy at Manulife Asset Management, told CNBC’s “Squawk Box.”
David de Garis, director of economics and markets at National Australia Bank, said he expects China to “reset growth and reform objectives” this week. That could provide further hints into the status of China’s ongoing tariff fight with the U.S., which is now on hold until March.
Among the details that could come out from China include the growth target for 2019, growth-supportive policies and reform measures essential for a deal with the U.S., de Garis wrote in a morning note.
The Japanese yen was stronger versus the U.S. dollar at 112.37 compared to 112.51 previously, while the Australian dollar inched up to 0.7191 from 0.7180.
Europe stocks close higher after Italy budget breakthrough; Fed meeting in focus; GSK jumps 4.4%
European Markets: FTSE, GDAXI, FCHI, IBEX
Continental banking stocks jumped more than 0.3 percent following the news, boosted by Italy’s notoriously fragile lenders. Italy’s Unicredit, Ubi Banca and Banco BPM were all trading more than 2 percent higher on the news. The euro also climbed on the back of the news, at one stage up nearly 0.6 percent to $1.1428.
Looking at individual stocks, Britain’s GlaxoSmithKline said it planned to split into two businesses on Wednesday. One side would deal with prescription drugs and vaccines and the other would focus on over-the-counter products. The revamp comes after the London-listed company formed a new joint venture with Pfizer’s consumer health division. Shares of GlaxoSmithKline rose 4.3 percent.
Meanwhile, France’s Natixis slumped toward the bottom of the benchmark during deals. The lender said late Tuesday it had booked 260 million euros ($296 million) of losses on poorly performing Asian derivatives. The announcement prompted shares to fall 6.7 percent on Wednesday.
On the data front, Britain’s inflation rate fell to a 20-month low in November, according to official data published Wednesday. The news is thought to offer some relief to consumers who have adopted a cautious approach to spending ahead of Brexit. Sterling traded slightly higher to around $1.266.
The declines have added to mounting pressure on the Fed to consider abandoning its commitment to yet more interest rate hikes.
Complicating matters for the central bank, President Donald Trump warned Tuesday that it must tread carefully in order not to “make yet another mistake,” while a Wall Street Journal editorial called for a pause.
“We don’t feel there’s any reason to hike today,” Brett Ewing, chief market strategist at First Franklin, told CNBC’s “Street Signs Europe” on Wednesday. “I think the Fed has put themselves in a box and guided the market into this hike.”
He added: “When you look at the inflation numbers here in the United States, they’ve actually been moderating here for the last four or five months.”
Nonetheless, market participants still widely expect the Fed to announce a quarter-point rate hike on Wednesday.
By the time of the European close, the S&P 500 index in the United States was around 0.6 percent higher.
The Dow Jones Industrial Average fell 351.98 points and closed at its lowest level so far this year at 23,323.66, erasing a 380 point gain that came prior to the Fed decision. The broad S&P 500 index also closed at a 2018 low, falling 1.5 percent to finish at 2,506.96 as technology and banks stocks rolled over. The Nasdaq Composite fell 2.1 percent to 6,636.83, its own 2018 closing low with shares of Apple losing more than 3 percent.
The major indexes all hit intraday lows for the year as well.
For traders, the Fed’s statement and Chairman Jerome Powell’s subsequent press conference did not suggest that the central bank would slow its pace of rate hikes as quickly as some had hoped. Markets took a leg lower during Powell’s comments that the central bank would continue to reduce the size of its balance sheet at the current pace.
The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 8 percent and 9 percent, respectively, this month. The S&P 500 is now in the red for 2018 by 6.3 percent.
The Dow has lost over 1,250 points this week.
The Fed decided to hike its benchmark overnight lending rate by one quarter point on Wednesday to a target range between 2.25 to 2.5 percent. The Fed did however trim its 2019 outlook for rate hikes to just two increases from three previously.
“I think the market reaction to all of this is the Fed is going to overdo it,” said James Paulsen, chief market strategist at Leuthold Group. “Powell said he sees no problem with balance sheet run off. That’s the one that hurts, that’s another potential path of dovishness that he didn’t take.”
The central bank permits $50 billion a month to run off the balance sheet, a collection of bonds the central bank bought to stimulate the economy during and after the financial crisis.
“I think that the run-off of the balance sheet has been smooth and has served its purpose,” he said during a news conference. “I don’t see us changing that.”
Equities across a range of sectors plunged following the Fed’s announcement. Consumer companies including Target, Amazon, Newell Brands and Nordstrom all fell more than 3 percent. Banks including Citigroup and Wells Fargo each lost more than 1.5 percent.
Aircraft manufacturer Boeing, which had led the Dow higher earlier in the session, dropped 2.5 percent. Industrial conglomerate 3M shed 2.3 percent while United States Steel Corp lost 6 percent.
The benchmark 10-year Treasury note yield hit a fresh low of 2.798 percent, its lowest level since May 30. The 30-year Treasury bond broke below 3 percent. The bond market seemed to believe the Fed has already slowed the economy by too much.
“The Fed still sees a solid underpinning for the economy based on the numbers and still sees the viability of two rate hikes next year,” said Quincy Krosby, chief market strategist at Prudential Financial. “The market needs, for the Fed’s statement to prove correct, an unequivocally strong parade of strong economic data for that forecast to hold.”
“That’s been the tug of war in the market,” Krosby added. “The old adage is that the price action — that is the market — gets it before the data. That’s at the core of the debate.”
Complicating matters further for the central bank, President Donald Trump warned Tuesday that it must tread carefully in order not to “make yet another mistake;” strategists expect the Fed Chair to skirt addressing the president’s comments.
Asked about Trump’s criticism, Powell said Wednesday that “political considerations play no role whatsoever in our discussions or decisions about monetary policy. We’re always going to be focused on the mission that Congress has given us. ”
FedEx shares were slammed by more than 12 percent after CEO Richard Smith blamed “bad political choices” for weakness in its overseas business. FedEx lowered its 2019 earnings guidance and reported weakness in its international business, putting the stock on pace for its worst day on Wall Street in more than a decade.
Social media gaint Facebook also fell sharply on Wednesday. Its stock fell more than 7 percent Wednesday after admitting it allowed other big tech companies to read users’ private messages. The company’s blog post came after a New York Times investigation found that Facebook gave companies including Netflix, Spotify and the Royal Bank of Canada the ability to read, write and delete users’ private messages.
Further, the D.C. Attorney General said it would sue the company over the Cambridge Analytica scandal.
—CNBC’s Sam Meredith and Jeff Cox and Patti Domm contributed reporting.