Asian Stocks Down as Investors Digest Fed’s Taper Talk

imageStock Markets51 minutes ago (May 19, 2021 10:59PM ET)

(C) Reuters.

By Gina Lee – Asia Pacific stocks were mostly down Thursday morning after the U.S. Federal Reserve hinted that debate on tapering asset purchases has already begun. Investors also digested trade and employment data from Japan and Australia respectively.

Japan’s Nikkei 225 inched down 0.06% by 10:28 PM ET (1:45 AM GMT) as April trade data released earlier in the day outperformed expectations. Exports grew 38% year-on-year, imports grew 12.8% year-on-year and the trade balance stood at JPY255.3 billion.

In Australia, the ASX 200 rose 0.88%. The country’s employment data for April was mixed, with the employment change declined by 36,000 jobs while the unemployment rate fell to a year-low of 5.5%.

China’s Shanghai Composite was down 0.51% while the Shenzhen Component edged up 0.16% after the People’s Bank of China released its loan prime rate earlier in the day.

Hong Kong’s Hang Seng Index fell 0.93% and South Korea’s KOSPI was down 0.67% after both markets reopened after a holiday.

The Fed’s hint came as the minutes from its April policy meeting were released on Wednesday, which said that “a number of participants suggested that if the economy continued to make rapid progress toward the Fed’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

The statement caught some investors off guard.

“It was a surprise to hear the talk about Fed tapering… the market had been thinking there might be a couple of months before you really saw this particular issue come into focus,” J.P. Morgan Global Research Chair Joyce Chang told Bloomberg. However, she added that it is not the time to bet against the current broader fundamentals on the outlook for growth.

Other investors were less fazed by the Fed’s hint.

“This is very much the market view, really,” ING economist Rob Carnell told Reuters, with the Fed expected to drop strong tapering hints by summertime and potentially shift its current dovish monetary policy by the end of the year.

“This is taking us to where we think we’re going to go, and perhaps this removes a little bit of uncertainty around that, so you get a slight increase in bond yields and the dollar rallying a little bit,” he added.

The benchmark 10-year U.S. Treasury yield steadied after climbing to 1.67%.

Meanwhile, volatility continued to the name of the game in cryptocurrencies. Bitcoin recorded a drop and rally of about 30%, all in the same day while other virtual currencies such as Ether posted losses from a recent selloff. Cryptocurrency-exposed shares, including Coinbase Global Inc. (NASDAQ:COIN), also dropped.

Asian Stocks Down as Investors Digest Fed’s Taper Talk

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