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World markets climb before expected Fed rate cut
HONG KONG - World stocks markets edged higher in cautious trade Tuesday ahead of an expected interest rate cut from the Federal Reserve.
The U.S. central bank is widely anticipated to slash its key rate by at least a half-point to 0.5 percent following repeated cuts since the financial crisis erupted last year. However, what the Fed says in its accompanying statement on the health of the world’s largest economy, already in recession, and what measures it might take to boost growth will likely have more bearing on investors.
European stocks rose early going, tracking most markets in Asia after a session marked by thin and directionless trade.
Several Asian markets showed some resilience late in the day. In Hong Kong and Shanghai, stocks opened in the red but bounced back modestly after the head of China’s central bank said more rate cuts could be in the offing.
“It’s very clear the macrodata continue to be nothing but hugely disappointing, but the markets have been able to overcome that because the policy response is coming through,” said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong.
Beijing, worried over China’s cooling economy, has been rushing out a series of stimulus measures, including massive spending plans and looser fiscal policies. On Tuesday, Chinese central bank Gov. Zhou Xiaochuan suggested the government would continue along that path.
“From this year to early next year, we will be facing pressure to cut interest rates, so we will cut gradually,” he told reporters in Hong Kong, where the Hang Seng gained 0.6 percent to 15,130.21.
Mainland China’s Shanghai’s key index rose 0.5 percent to 1,975.01, and South Korea’s Kospi edged up 0.3 percent to 1,161.56.
Japan’s Nikkei 225 stock average fell 96.64 points, or 1.1 percent, to 8,568.02. Australia’s benchmark index declined about 1 percent.
In Europe, Britain’s FTSE 100 index was 1 percent higher, Germany’s DAX added 1.6 percent and the CAC 40 in France climbed 1.5 percent.
A host of earnings reports this week was cause for anxiety among many investors. Goldman Sachs Group Inc. is expected Tuesday to report its first quarterly loss since it went public in 1999 as a result of the global financial turmoil. Morgan Stanley reports results on Wednesday.
“The possible cutting of interest rates will help in the short term, but there are too many uncertainties out there,” said Peter Lai, investment manager at DBS Vickers in Hong Kong. “We’re in a recession ... and people are wondering if other companies may need rescues.”
Elsewhere, Thailand’s key SET index rose 1.9 percent to 445.31 as investors welcomed the selection of Abhisit Vejjajiva as the country’s new prime minister, ending six months of instability caused by anti-government demonstrations that included the takeover of Bangkok’s two main airports.
Overnight in New York, U.S. stocks fell back amid investor concerns about the $50 billion fraudulent investment scheme led investment manager Bernard Madoff.
The Dow Jones industrial average finished down 65.15, or 0.75 percent, to 8,564.53. The Standard & Poor’s 500 index lost 11.16, or 1.27 percent, to 868.57. European markets also closed lower.
U.S. stock index futures pointed to a rebound on Wall Street. Dow futures gained 37 points, or 0.4 percent, to 8,639, while S&P futures were up 4.6 points, or 0.5 percent, to 876.9.
In currencies, the dollar fell to 90.20 yen from 90.46 yen late Monday in New York. The euro dipped to $1.3660, after peaking in late New York trading at $1.3722, its highest since Oct. 14.
Oil prices rose above $45 a barrel amid expectations that OPEC will announce a big production cut Wednesday. Light, sweet crude for January delivery was up 86 cents to $45.44 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.