The FOMC's March meeting turned out to be more hawkish than expected. Speaking after the central bank's latest policy announcement, Yellen said the Fed may increase rates about six months after the asset-purchase tapering is done.
At the conclusion of the Fed's two-day policy meeting, the US Federal Open Market Committee elected to further reduce the value of its monthly asset purchases by $10 billion to $55 billion. Also policymakers have pushed forward the tightening cycle and upgraded the labor market outlook. The Fed also modified its forward guidance, removing the thresholds of 6.5% unemployment rate and 2.5% inflation rate. The central bank, however, stressed that 'the change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements'.
The central bank pushed forward the expected pace of its rate hike cycle, forecasting the Fed funds rate, now close to zero, would rise to 1.0% at the end of 2015 and 2.25% at the end of 2016. Also, the fed lowered its unemployment rate projections, forecasting the jobless rate to reach 6.1-6.3% this year, down from 6.3-6.6% previously estimated, before falling to 5.6-5.9% in 2015, compared 5.8-6.1% previous projected, and 5.2-5.6% in 2016, compared with 5.3-5.8% projected previously. Meanwhile, the Fed lowered the mid-point for real GDP growth by one-tenth to 2.9%, 3.1% and 2.8% in 2014, 2015 and 2016 respectively.
Meanwhile, risk aversion selloff in the region also flared on deepening concern about slowdown in the world's second-largest economy after Goldman Sachs Group Inc. cut its forecast for China's economic growth expansion this year to 7.3% from 7.6%. The nation's official 2014 growth target is 7.5%, which would be the slowest pace since 1990.
Among Asian bourses, Japanese share market stumbled, as risk aversion selloff across the board today, amidst surprisingly hawkish debut from new United States Federal Reserve chair Janet Yellen. Sentiment also soured after data showed foreigners sold a record amount of local stocks last week. The benchmark Nikkei dropped 1.65% to 14224.23 while the Topix index of all first-section issues slipped 1.58% to 1,145.97.
Data from Japan's finance ministry showed that foreign investors sold a net Y1.1 trillion ($11 billion) of Japanese stocks last week, the most since 2005 when comparable data became available.
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Japan Display fell 0.8% to Y757 after closing down 15% from its Y900 initial public offering price on its first Tokyo Stock Exchange listing day Wednesday.
In Australia, Australian stock market finished weaker board on worried about capital outflow after U.S. Federal Reserve Chairwoman Janet Yellen hinted rate hikes could come as early as spring 2015. The benchmark S&P/ASX 200 Index shed 1.15% to 5294 and the broader All Ordinaries Index dropped 1.12% to 5312.70.
Shares of material and resources companies were the worst-performing in the ASX index. Resources giant BHP Billiton fell by 1.8% to A$35.20, while main rival Rio Tinto lost 0.9% to A$60.80. Fortescue Metals Group, which produces only iron ore, DROPPED 1.8% to $4.90.
Australia's gold miner shares tanked inline with drop in bullion prices in the international market. The Comex gold futures prices were down by US$17.70 an ounce or 1.3% to US$1,341.30 per ounce. Australia's biggest gold producer Newcrest Mining dropped 7.9% to A$10.61, Evolution Mining 9.3% to A$0.875 and Resolute Mining 9.5% to A$0.620.
Shares of construction related companies rose after Credit Suisse upgraded property developers Australand and Stockland from neutral to outperform, citing growing confidence in the construction sector. Shares in Australand rose 1.5% to A$4.04, while Stockland was unchanged at A$3.75.
Shares of Brambles lost 2% to A$9.36 on reports pallets and logistics business had broken-off preliminary discussions to buy Singapore based competitor Goodpack.
Myer (MRY) shares ended 5.26% softer to A$2.52 after the department store owner posted an 8% slump in first half profit to A$81 million.
In New Zealand, Equities on the New Zealand stock market added further gains today, despite sluggish regional peers, thanks to domestic official data showing annual economic growth exceeded 3% for a second straight quarter. The NZX 50 rose 5.675 points, or 0.1%, to 5160.39. Within the index, 24 stocks rose, 18 fell and eight were unchanged.
New Zealand's annual economic growth exceeded 3% for a second straight quarter, buoyed by dairy exports, adding to signs of increasing inflation pressure that may require higher borrowing costs. Gross domestic product increased 3.1% in the fourth quarter from a year earlier, Statistics New Zealand said in Wellington today. That's slower than the revised 3.3% pace in the third quarter. GDP rose 0.9% from the third quarter.
Air New Zealand rose 1.6% to $1.895 after rival Jetstar quit a key route to Singapore. Jetstar, the discount unit of Australian airline Qantas Airways, said it will drop its Auckland-Singapore route. Jetstar's decision comes as Air New Zealand waits for regulatory approval for a code sharing deal with Singapore Airlines which will see New Zealand's national carrier return to Singapore daily for the first time since 2006. Auckland International Airport dropped 0.5% to $3.88.
In China, Mainland China stock market declined for second session in row, as concern deepened that the world's second-largest economy is slowing. Meanwhile concerns over liquidity crunch in the market intensified selloff pressure. The benchmark Shanghai Composite Index closed 1.4% down from prior day closure to 1993.48.
Investor concerns about Chinese economic growth slowdown intensified after Goldman Sachs Group Inc. cut its forecast for China's economic growth expansion this year to 7.3% from 7.6%. The nation's official 2014 growth target is 7.5%, which would be the slowest pace since 1990.
Sentiments for risk assets also dimmed after China's yuan fall beyond 6.20 level to the U.S. dollar amid market speculation the central bank will keep the currency weak as economic growth slows down. The yuan has tumbled 1% this week after the People's Bank of China doubled the daily trading band for the currency to 2% from the midpoint set each day by the central bank. Data this year, including a surprise 18% drop in exports in February and soft manufacturing reports, have raised concerns that China may struggle to meet its growth target this year of around 7.5%. Rising debt worries following the country's first domestic bond default and the looming bankruptcy of a Chinese developer have added to market jitters. Some traders suggested the decline in the currency may reflect the central bank's desire to offer a sluggish economy some help by effectively easing monetary conditions. However, not all traders subscribed to that view. Others said the decline reflected genuine trade to reduce long positions in the currency.
Meanwhile selling pressure mounted further on fears that the bank would take a more aggressive tack to remove interbank liquidity after the People's Bank of China drained a net CNY48 billion from the market this week, slightly greater than the CNY40 billion removed last week.
Among SSE sectors, all 10 sectors of the SSE index declined, with consumer discretionary sector was worst performer in the SSE sectoral peers, down 3.5%, followed by information technology down 3.5%, healthcare down 2.6%, telecommunication services down 2.3%, consumer staples down 2%, utilities down 1.8%, materials down 1.6%, energy down 15%, industrials down 1.2% and financials down 0.5%.
In Hong Kong, HK share market finished sharp lower in heavy trade, following losses on Wall Street after the head of the U.S. central bank announced a further tapering of US$10bn a month and indicated interest rates could be hiked earlier than expected. The Hang Seng Index closed down 1.79% at 21182.16.
Among the HK 50 blue chips, 44 declined and 6 rose. Wharf Holdings dipped 4% to HK$47.45, becoming the top blue-chip loser. China Resources Power Holdings Co jumped 2.3% to HK$19.82, becoming the top blue-chip gainer.
Among other blue chips, HSBC (00005) declined 1.1% to HK$75.95, hitting a 9-month low. China Mobile (00941) dropped 3.6% to HK$67 as its earnings decline overshot expectations.
Tencent Holdings dipped 1.7% to HK$558 after hitting falling 5% at one stage, after Asia's biggest Internet Company posting fourth-quarter net income that missed the marker expectation. Tencent plans a 5-1 share split to boost holdings by individuals.
BYD tumbled 14% to HK$47.60 after the carmaker projected first-quarter net income of as much as 15 million yuan, which Nomura Holdings Inc. said was lower than expected.
In India, Indian stocks market declined further from record highs hit at the start of the week, on worries U.S. interest rates would rise sooner than expected and dent the appeal of higher-yielding emerging markets. The S&P BSE Sensex was down 92.77 points or 0.42% to 21,740.09, its lowest closing level since 6 March 2014.
Shares of state-run oil marketing companies fell on a media report that state-run oil marketing companies may have to absorb a higher share of under recoveries this fiscal year ending March 2014. BPCL (down 4.07%), HPCL (down 2.07%) and Indian Oil Corporation (IOC) (down 2.72%), edged lower. Shares of state-run upstream companies were mixed. ONGC rose 0.86%. Oil India fell 1.45%.
Metal stocks dropped as concern deepened that the Chinese economy is slowing. China is the world's largest consumer of copper and aluminum. Sesa Sterlite (down 1.73%), Hindustan Zinc (down 0.08%), Jindal Steel & Power (down 1.97%), Hindalco Industries (down 0.54%), Hindustan Copper (down 1.54%), JSW Steel (down 2.47%) and Tata Steel (down 1.57%), dropped. NMDC (up 0.34%), Steel Authority of India (SAIL) (up 0.27%) and National Aluminum Company (up 0.72%) edged higher.
Mukand rose by maximum permissible level of 20% at Rs 24.95 after promoters steeply hiked their stake in the company through rights issue. The announcement was made during market hours today, 20 March 2014. Mukand said that the company's promoters have hiked their stake in the company to 73.36% on 15 March 2014 from 54.33% as at 31 December 2013 through rights issue.
Shares of car major Maruti Suzuki India edged lower in choppy trade after Japanese carmaker Nissan Motors on Wednesday, 19 March 2014, launched its low-cost Datsun brand in India by rolling out its GO hatchback at an aggressive price to revive its fortunes after a tough year. Priced aggressively at Rs 3.12 lakh onwards, the GO will challenge Maruti Alto and Hyundai Eon at the entry level segment with a bigger 1,200-cc engine, more cabin space and superior mileage. The stock lost 0.37% to Rs 1,863.60. The stock hit high of Rs 1,875 and low of Rs 1,847.95.
Elsewhere in the Asia Pacific region, Taiwan's Taiex index dipped 1.06%. South Korea's KOSPI index fell 0.94%. Singapore's Straits Times index fell 0.77%. Indonesia's Jakarta Composite Index sank 2.54%. New Zealand's NZX50 jumped 0.11%. Malaysia's KLSE Composite rose 0.04%.
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