Global stocks fall on Fed’s gloomy employment outlook

Global stocks fell on Thursday after the US Federal Reserve predicted it would not raise rates until 2022 because of an expected protracted slump in employment.

Japan’s benchmark Topix slipped 0.9 per cent and Australia’s S&P/ASX 200 dropped 1.3 per cent, while Hong Kong’s Hang Seng and the CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 0.3 per cent.

The falls in Asia-Pacific followed a cool reaction on Wall Street to the Federal Reserve’s decision to keep interest rates at near zero until 2022, with the S&P 500 index ending 0.5 per cent lower after swinging between gains and losses on Wednesday.

The Fed left interest rates unchanged at 0-0.25 per cent by a unanimous vote and pledged to continue buying Treasuries and mortgage-backed bonds at least at the current pace.

The Fed’s forward guidance, which it reiterated from the previous two meetings, was for the federal funds rate target range to stay at the current level until the Federal Open Market Committee was “confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals”.

“Powell is trying to send a strong signal . . . that the Fed is going to keep policy very loose for a long time,” said James McCann, senior global economist at Aberdeen Standard Investment. “That’s a good start but it needs to really do all it can — and much more than it is doing currently — to avoid a repeat of the tepid recovery after the financial crisis.”

The FOMC’s median forecast for economic contraction was in line with market expectations of 6.5 per cent in 2020. But members’ estimates ranged from 4 to 10 per cent.

“This dispersion of viewpoints across the committee reinforces the uncertainty in just how the economy will fare post-Covid,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

In Hong Kong, shares in NetEase rose 8.7 per cent on their first day of trading after a secondary listing for the Chinese tech company. NetEase is the latest homecoming listing for Hong Kong’s stock exchange as Washington tries to force Chinese companies that do not comply with US accounting practices to delist in New York.

Oil prices were under pressure after weekly US data showed crude inventories rose to a record high. Brent crude, the international benchmark, fell 2.1 per cent to $40.84 a barrel, while US marker West Texas Intermediate dropped 2.4 per cent to $38.68.

Futures tipped the S&P 500 to shed 0.2 per cent when Wall Street opens later in the day.