MW; Stocks off highs as Fed rate cut euphoria fizzles out
Automobile stocks drop in Tokyo, while banks tumble in Sydney
HONG KONG (MarketWatch) -- Asian markets gave up most of their early gains Wednesday, with initial enthusiasm over the U.S. Federal Reserve's steep interest rate cut fizzling as investors considered a bleak global economic outlook and concerns about corporate earnings.
In Tokyo, the Nikkei 225 Average climbed as much as 2% in early trading but reversed direction and slipped 1% to 8,482.27 in afternoon trading, while the broader Topix index lost 0.8% to 821.78. A strengthened yen against the U.S. dollar hurt some exporters.
"I really don't think [the Fed action] is a surprise at all, because most of the measures they've announce have been in place for some months. They just formalized the approach they've already adopted," said Tim Rocks, Asia strategist at Macquarie Research.
South Korea's Kospi also reversed initial gains and dropped 0.3% to 1,157.92.
Hong Kong and Australian shares also came off their highs, with the Hang Seng Index ending the morning session up 0.9% at 15,263.74, while the S&P/ASX 200 index gaining 0.2% at 3,562.30.
China's Shanghai Composite rose 1.3% to 1,999.93, Taiwan's Taiex gained 1% to 4,660.81, Singapore's Straits Times Index advanced 0.6% to 1,792.63 and New Zealand's NZX 50 index was little changed at 2,695.93.
Referring to the recent strong performance of most Asian markets, Rocks said investors will at some point have to address the fact that the U.S. economy is "very sick" and that earnings growth in Asia could remain weak.
"You may see an absence of bad news until we get to the reporting season in February-March. It's possible markets will go up until then and that they'll fall back pretty much close to their lows again during February and March. That'll be a better entry point for a more sustained rally," he added.
Regional detail
Financial shares were mixed, with Japanese and South Korean banks rising after the U.S. central bank's Federal Open Market Committee established a target range for the federal funds rate of zero to 0.25%, effectively cutting its key rate for overnight lending to banks by between 0.75% and 1%. The Fed also promised new measures to stimulate spending. See full story.
Mizuho Financial Group shares climbed 1.9% in Tokyo and KB Financial Group added 4.4% in Seoul.
But Australian lenders declined as Commonwealth Bank of Australia requested a trading halt on its shares, pending an announcement about a A$2 billion ($1.36 billion) share placement plan. A Reuters report said the bank has scrapped the share issue and relaunched it at a lower price. CBA separately wrote it in a statement it had terminated a share placement agreement with Merrill Lynch International Australia "on the basis that Merrill Lynch didn't inform potential investors of the various disclosures made" by CBA a day earlier.
Shares of Australia & New Zealand Banking Group tumbled 5.6%, while Westpac Banking Corp. lost 3.5%.
In Hong Kong, property developers were broadly higher on hopes commercial banks may cut lending rates after the Hong Kong Monetary Authority slashed its key interest rate by one percentage point earlier Wednesday, in the wake of the Fed's rate move.
Shares of Sun Hung Kai Properties rose 4.5% and Henderson Land Development Co. surged 7%.
Conita Hung, head of equity markets at Delta Asia Financial Group, said property stocks may drop later in the day unless commercial banks also reduced rates.
Shares of exporters were mixed in Tokyo, with overnight gains on Wall Street lifting some, while a strengthened yen weighing on others. Shares of Nikon Corp. ) advanced 1%, but Sony Corp. fell 0.9%.
Shares of automobile companies also declined after the Nikkei business daily reported Honda Motor Co. (HMC:
22.85, +0.24, +1.1%) (JP:7267: news , chart , profile ) will postpone or curtail other domestic capital spending and may cut its operating profit outlook for the fiscal year ending in March. Honda tumbled 6.9%, while Toyota Motor Corp. (TM:
69.74, +4.04, +6.2%) (JP:7203: news , chart , profile ) gave up 2.5%.
The U.S. dollar recently bought 88.51 yen in Asian currency trading, compared with 90.09 yen in the previous session.
Among resource shares, BHP (BHP:
99.24, +6.18, +6.6%) climbed 3% in Hong Kong.
January crude-oil futures were up 83 cents at $44.43 a barrel in electronic trading, after dropping 91 cents to $43.60 a barrel on the New York Mercantile Exchange.
On Wall Street, the Dow Jones Industrial Average ($INDU:
8,924.14, +359.61, +4.2%) surged 4.2% to 8,924.14 on the Fed rate cut. The S&P 500 index ($SPX:
913.18, +44.61, +5.1%) rose 5.1% to 913.18, while the Nasdaq Composite ($COMPX:
1,589.89, +81.55, +5.4%) advanced 5.4% to 1,589.89.
