In a busy period on the economic calendar, Asian stocks fell for a 6th consecutive day as investors took an unexpected rate cut in South Korea and worse than expected Australian jobs news as signs that the global economic slowdown is deepening.
There was some positive news coming from the US as its trade deficit narrowed in May, falling 3.8% to $48.7bn in May, from $50.6bn in April as cheaper oil lowered the value of imports, while exports to Europe and China increased. The politically sensitive trade deficit with China increased to $26bn, up from $24.5bn the previous month whilst exports to the European Union were up 2.6% in May.
The release of the Federal Reserve meeting minutes showed that Federal Reserve officials are open to the possibility of a new round of asset purchases, though the US economy may need to get weaker before any further action is taken. The Dow Jones fell 1% once the minutes were published but recovered slightly, ending just 0.4% lower. Markets were expecting hints that the Fed would take more aggressive actions to bolster the economy after poor jobs reports and other economic data, have weakened the U.S. currency, however, the USD traded mixed to higher once the Federal Reserve revealed that no real changes to its wait-and-see approach to stimulating the economy were made. At time of writing, the US Dollar index which measures the greenback against a basked if 6 weighted major currencies was up 0.03%, valued at $83.60.
Asian trading on Thursday was dominated by the sentiment that the Bank of Japan will make no changes to its monetary stimulus programs, fuelling a risk-off trading session that sent investors selling stocks and investing in the yen. The Yen was up against all 16 major counterparts with the USD/JPY down 0.33%, trading at 79.49, whilst Hong Kong’s Hang Seng Index was down 1.87%, Australia’s S&P/ASX200 was down 0.51%, and Japan’s Nikkei 225 Index was down 1.40%. The markets were caught by surprise as the Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years, lowering the interest rate by 0.25% to 3%, the first cut since February 2009.
Also keeping Asian stocks in check and fuelling concerns of the state of the global economies was Australian employers unexpectedly reduced payrolls in June whilst the jobless rate increased. The number of people employed fell by 27,000, erasing a revised 27,800 job gain in May whilst the jobless rate increased for a second month running, to 5.2 percent from 5.1 percent.
The focus shall stay with Asia over the next 24 hours as markets will keep an eye on the Bank of Japan’s monetary policy statement due out later as well as Chinese gross domestic product rates expected later also.