Japan’s Nikkei 225 was up late morning Wednesday in volatile trading.
Photo: behrouz mehri/Agence France-Presse/Getty ImagesGlobal stock markets diverged, as the Fed’s emergency rate-cut in the U.S. prompted some investors to question how much central banks can do to offset the economic impact of the novel coronavirus.
Market moves in the Asia-Pacific region on Wednesday ranged from losses in Australia to solid gains in South Korea, while U.S. futures advanced—suggesting Wall Street could claw back some of the previous day’s roughly 3% losses. Bond yields hovered near record lows.
On Tuesday, the U.S. Federal Reserve cut its key rate by 0.5 percentage point to between 1% and 1.25%, the first such move between scheduled policy meetings since the 2008 financial crisis.
Even so, major U.S. indexes fell, reflecting concerns the central bank can’t on its own prevent a drop in confidence and spending without a commanding response from public-health authorities and other government agencies.
Kevin Leung, executive director for investment strategy at Haitong International Securities in Hong Kong, said the Fed’s action stoked concerns that coming economic data could be very weak, or it believed the epidemic’s effects would be worse than is widely expected.
“People start to ask, do they know something? Or should we sell now to avoid things [getting] really bad ahead?” Mr. Leung said.
By late morning in Hong Kong on Wednesday, the city’s benchmark Hang Seng Index had edged down 0.1%, while in mainland China the Shanghai Composite was little changed.
Australia’s benchmark S&P/ASX 200 declined 1.2%, while Japan’s Nikkei 225 was up 0.4% late morning in volatile trading.
Seoul’s benchmark Kospi led gains, advancing 2.1% after South Korea’s government proposed a roughly $10 billion extra budget to help offset the impact of the outbreak.
S&P 500 futures rose 0.8%.
Alex Au, managing director at Alphalex Capital Management, a hedge fund based in Hong Kong, said he thought the Fed had acted too soon, given it had limited room to further reduce borrowing costs before hitting negative rates.
Mr. Au said it was hard to determine how much further markets might sell off. “I am just holding my cash, sitting on the sidelines and waiting for clearer signals,” he said.
However, he said a weaker U.S. dollar might support some emerging-market stocks. The WSJ Dollar Index has declined about 1.4% in the past five sessions.
In debt markets, the yield on the benchmark 10-year U.S. Treasury dropped below 1% for the first time on Tuesday as investors sought safe-haven assets, and fell further to about 0.98% on Wednesday morning in Asia. Yields fall as bond prices rise.
—Quentin Webb contributed to this article.
Write to Xie Yu at Yu.Xie@wsj.com
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March 04, 2020 at 11:30AM
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