Most Asian markets rebounded yesterday, reversing their recent gut-wrenching plunge as investors welcomed a hefty, surprise rate cut by the US Federal Reserve to shore up the sagging US economy.
But European markets slipped in early trading.
Analysts said the market turmoil would linger for some time because the Fed's emergency action was seen by some as a sign US authorities view the credit crunch as a very serious problem.
"The Fed's action provided a very positive surprise," Shinko Securities Co strategist Tsuyoshi Segawa said in Tokyo. "But people are also starting to think that things may be so bad they needed to act."
In Hong Kong, the Hang Seng index surged 10.7 percent -- its biggest gain 10 years -- to 24,090.17, regaining much of the 13.7 percent it had shed over the previous two days.
Japan's Nikkei 225 index rose 2 percent to close at 12,829.06 after tumbling 9.3 percent the previous two days, while India's Sensex was up 5.7 percent in afternoon trading, recapturing nearly half its 12 percent losses from Monday and Tuesday.
In Shanghai, China's benchmark index, which sank 12 percent earlier this week, bounced back 3.1 percent, and Australia's market rebounded 4.4 percent, snapping a 12-day losing streak.
The Fed on Tuesday slashed its federal funds rate three-quarters of a percentage point to 3.5 percent, the biggest reduction in this target rate for overnight loans on records going back to 1990. It also was the first time the Fed has changed rates between meetings since 2001.
On Wall Street on Tuesday, the Dow Jones industrial average plunged more than 450 points initially but recouped most of its losses as the day progressed to close at 11,971.19, down 128.11 points, or 1.1 percent.
US stock index futures showed that Wall Street was poised for a modest drop yesterday. Dow futures were down 40 points, or 0.3 percent, to 11,911. Standard & Poor's 500 futures were down 5.5 points, or 0.4 percent, to 1,303.8.
In Europe, where investors had a chance to cheer the Fed's cut the previous day, the UK's FTSE 100 was down 1 percent, while France's CAC 40 slid 0.9 percent and Germany's DAX was down 0.7 percent.
Investors in Asia were already factoring in another US rate cut of as much a half-point when the Fed holds its regular meeting next Tuesday and Wednesday, traders said.
But Asian markets could slide back if Wall Street continues to decline in coming sessions, they said.
The Fed's move initially helped the US dollar, but later the US currency dropped to ¥106.31 from ¥106.48 on Tuesday in New York.
Asian-based companies welcomed the Fed's move, too.
"Anything that helps consumer sentiment is good for our business," said Bruce Rockowitz, president of Li & Fung, a Hong Kong-based exporter that sources products for major brands and retailers worldwide, including Wal-Mart Stores.
"From a psychological effect, it's given people in the US at least comfort that the government will do whatever they can to solve this crisis," he said.
Still, analysts warned that lower interest rates won't fix bad credit problems -- and usually take several months to have an effect on an economy.
"We consider the Fed's rate cut still insufficient for the global financial markets to completely recover and help the Japanese stocks to fully rebound," Credit Suisse chief strategist Shinichi Ichikawa said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
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