Markets

Focus on Fed, BOJ, dollar and Toshiba

The Fed announced Wednesday it would start winding down its $4.5 trillion balance sheet in October. While the Fed left interest rates unchanged — as was widely expected — it indicated that one additional rate hike was probable this year. The central bank kept its forecast for interest rates in 2017 and 2018, but lowered its expectation for the number of rate hikes between now and 2019 by one.

Yields on the 10-year U.S. Treasury note rose to their highest levels since Aug. 8 on the news. The benchmark 10-year Treasury yield stood at 2.27 percent on Wednesday after climbing as high as 2.29 percent. Meanwhile, the two-year Treasury note yielded as high as 1.451 percent, touching its highest levels since 2008.

There were also foreign exchange moves following the announcement. The dollar index, which tracks the greenback against a basket of currencies, held onto overnight gains to stand at 92.610 at 8:14 a.m. HK/SIN. Against the Japanese currency, the dollar extended gains to fetch 112.62 yen, its highest levels since mid-July.

“The Fed did not surprise, but the underlying signal was more hawkish than markets expected,” said David Plank, head of Australian economics at ANZ, in a note.

Stateside, most indexes closed higher on Wednesday as financial stocks made gains. The Dow Jones industrial average tacked on 0.19 percent, or 41.79 points, to close at 22,412.59.

In corporate news, Japan’s Toshiba said Wednesday it would sell its memory chip unit to a consortium backed by Bain Capital. While Bain had brought SK Hynix in on the deal, Toshiba did not mention the South Korean chip maker in its announcement, Reuters reported. The deal would be worth around 2 trillion yen ($18 billion), Reuters added. Toshiba stock fell 0.95 percent, while SK Hynix was up 0.74 percent in early trade.

Meanwhile, Western Digital said it would be commencing arbitration against Toshiba through its subsidiaries. The U.S. data storage company, which is involved in joint ventures with Toshiba, had been part of another group that had attempted to buy the Japanese conglomerate’s flash memory unit.

Over in Australia, Commonwealth Bank of Australia announced Thursday that it would sell all of its Australia and New Zealand life insurance business to AIA Group for A$3.8 billion ($3.04 billion). Shares of the bank were up 0.72 percent, outperforming other financial names in Australia, which were mixed.

In other currencies, the euro continued to track lower against the dollar after falling steeply on the Fed’s Wednesday announcement. The common currency fetched $1.1866 at 8:17 a.m. HK/SIN, below a low of $1.1882 seen in the previous session.

The Bank of Japan is expected to issue a monetary policy statement on Thursday. The Philippine and Taiwanese central banks also make rates decisions later in the day.

In economic news, New Zealand’s second-quarter GDP rose 0.8 percent. GDP in the first quarter was revised to 0.6 percent from 0.5 percent.

Hong Kong CPI is due at 4:30 p.m. HK/SIN.

On the energy front, oil prices were steady. Brent crude futures were off 0.12 percent at $56.22 a barrel and U.S. West Texas Intermediate crude rose 0.08 percent to $50.73.

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