Global stocks rebounded on Thursday after the dovish Fed’s decision to cut interest rates by 25 points, but lowering expectations for another correction this year. Last night, Wall Street reacted to the news with sharp declines, as Dow Jones wiped out more than 300 points. The negative sentiment extended to the Asian trading session, where most of the markets sank. However, during the European trading session, the positive earnings reports pushed the equities up and turned global stock markets into the green.
Yesterday, the US Federal Reserve cut interest rates for the first time in more than a decade on Wednesday, citing “global developments” along with “muted inflation” as reasons for easing monetary conditions. However, Chairman Jerome Powell told reporters in a news conference following the Federal Open Market Committee’s rate decision that the central bank’s rate cut was a “midcycle adjustment”, hinting that further rate cuts later this year were not a sure thing.
Meanwhile, the US and China ended a brief round of trade talks, without achieving much progress in ending their protracted dispute. The world’s two largest economies have been engaged in a trade war since last year. In that time, they’ve slapped tariffs on billions of dollars’ worth of each other’s goods.
Asian markets recap
The main Asia-Pacific stock indexes ended today’s trading session into the red, amid weak economic data from China, a decline in investor optimism over lack of progress after the end of the first phase of US-China trade talks and, above all, after disappointment that the US Federal Reserve cut interest rates with 25 basic points and do not intend to take similar actions soon.
In China, the mainland index Shanghai Composite declined by 0.81% to 2,908.77 points. A new warning for the economy came from China after the Caixin index dropped for the third consecutive month. China’s manufacturing activity contracted in July, according to results of a private survey released on Thursday. The factory Purchasing Managers’ Index (PMI) was 49.9 in July — slightly better than expected, but still in contractionary territory.
Hong Kong’s index Hang Seng also suffered a loss, losing 0.89% to 27,529.25 points. Hong Kong-listed shares of Standard Chartered jumped 2.93% after the lender announced a larger-than-expected first-half profit.
Only the Japanese blue-chip index Nikkei 225 index overcame earlier losses and ended the trading session with a gain of 19.46 points, or 0.09%, to 21.540,99 points. The best performers of the session were Nomura Holdings Inc (+9.02%), TDK Corp (+7.79%) and Takeda Pharmaceutical (+7.40%), while on the flipside were Toyo Seikan Group Holdings (-10.69%), Nippon Express Co (-7.95%) and Yamato Holdings Co (-7.95%).
South Korean benchmark Kospi dropped by 0.36% to 2,017.34 points. The stock of the chipmaker SK Hynix rose by 1.04%, while the prices of Samsung Electronics fell by 0.33%. Trade numbers for July showed South Korean exports fell 11% on-year, which was slightly better than the 11.3% drop analysts had predicted. In particular, semiconductor exports dropped 28.1%. Imports declined 2.7% compared to the 8.1% drop expected.
European markets mid-session recap
European markets recovered after earlier losses and returned into the green at mid-session trading. The pan-European Stoxx 600 adds 0.36% to 387.16 points. The earlier session started with declines following the disappointment from the Fed’s decision on interest rates, as well as the lack of progress after the end of the first phase of US-China trade talks.
German index DAX 30 edged higher by 29.65 points, or 0.24%, to 12,218.69 points at 09:35 GMT. The stocks of the industrial giant Siemens sank by 4.6% after the company said it was seeing a weaker environment in many of its key markets, illustrated Europe Inc’s headaches with finding growth outside of debt-driven consumer spending. The shares of the online fashion retailer Zalando climbed 14.4% after raising its full-year profit outlook and following upbeat earnings from sportswear maker Puma on Wednesday. The stocks of carmakers are slightly into the green with Volkswagen gaining 0.21% and Daimler inching higher by 0.06%.
French index CAC 40 is up by 0.53% to 5,548.38 points at mid-session trading. The shares of the telecom Altice Europe gained 23.4% after confirming that the group returns to revenue growth in France thanks to aggressive pricing policy. The bank Societe Generale gained 4.6% after reporting a net income of 1.05 billion EUR (1.16 billion USD) for the second quarter, beating market expectations. The chemical company Arkema gained 5% amid strong financial statements for the first half of 2019.
British blue-chip index FTSE 100 added 5.08 points, or 0.07%, to 7,591.86 points. Shell, the most valued company on the FTSE 100, fell by 4.3% as its second-quarter profit slumped to a 30-month low due to lower oil and natural gas prices and refining margins. The shares of Standard Chartered jumped by 3.2% as investors focussed on strong results despite a warning on risks from the US-China trade war. RSA Insurance gained 3% after results, while Barclays added 2.5% after hiking its dividend.
Wall Street pre-session recap
The US stock index futures rebounded Thursday morning, after tanking a day earlier when the Federal Reserve dampened hopes of a lengthy easing cycle following a 25-basis-point rate cut.
Around 6 a.m. ET, Dow futures indicated a gain of more than 90 points at the open. Futures on the S&P and Nasdaq were slightly higher.
The markets will focus on the latest weekly jobless claims, which will be released at around 8:30 a.m. ET.
The closely watched ISM manufacturing index for July, manufacturing Purchasing Managers’ Index (PMI) data for July, construction spending figures for June, and the latest reading of light vehicle sales will follow later in the session.