A pedestrian is reflected on a an electronic board showing the Japan’s Nikkei average (top) and other market indices including the exchange rate between the Japanese yen against the U.S. dollar (bottom) at a brokerage in Tokyo, Japan, September 9, 2015.
Asian shares rose modestly on Friday on relief the Federal Reserve held off on raising interest rates but gains were capped by renewed concerns about the health of the global economy, in particular China.The dollar was on the defensive, having fallen more than 1 percent after the Fed’s decision, while U.S. bond yields plunged, erasing their sharp rises in the past couple of days. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, led by financials, although Japan’s Nikkei average fell 1.4 percent, tracking losses on Wall Street.Major Wall Street indexes gave up a 1 percent rally to end lower, with the S&P 500 index losing 0.3 percent. [.N]Fed Chair Janet Yellen said the outlook abroad has appeared to become less certain, adding that recent falls in U.S. stock prices and a rise in the value of the dollar already were tightening U.S. financial market conditions.”I think today’s decision will prove positive for markets in the end. But volatility is likely to remain high as markets, like the Fed, will still have to confirm the U.S. economy is withstanding the adverse impact from the global economy,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.Analysts and traders had been nearly evenly split on whether the Fed would raise rates for the first time in nearly a decade, though markets had priced in only a one-in-four chance of a hike.The Fed’s fresh economic projections showed 13 of 17 policymakers still foresee raising rates at least once in 2015, down from 15 at the last forecast made in June.
Financial markets, which have constantly forecast a far slower pace of policy tightening than the Fed’s projections, were less convinced.Instruments such as federal fund futures and overnight indexed swap are pricing in only about one in two chance of a rate hike by the end of year.For the Fed to raise rates, Yellen said she wanted to see more improvement in the U.S. labor market and expressed concern over weak inflation. Referring to the global outlook, Yellen explicitly said the central bank was focusing on the slowdown in China and emerging markets, …Read More