Asian markets advance on Fed record rate cut

Hong Kong follows Fed with 100 bps cut while Japan expected to cut rates tomorrow

Stock markets across the Asian region closed higher after the U.S. Federal Reserve cut its key interest rate to a historic low in an effort to perk up the sagging U.S. economy. However, the major Asian averages came off their early highs over the course of the trading session amid worries about a bleak global economic outlook and concern over corporate earnings.

Asian market started the day higher taking cue from Wall Street. On Wall Street, the Dow Jones industrials surged up 360 points or 4.2% to 8,924.1, the Standard & Poor's 500 index advanced 44.6 points or 5.1% to 913.2 and the Nasdaq composite index rose 81.6 points or 5.4% to 1,589.9.

In the commodity market, crude oil prices rose for the first time in last four day trading above US$44 a barrel in Asia as OPEC is poised to enact its largest production cut in a decade at a meeting today in Algeria. Light, sweet crude for January delivery, due to expire on Friday, was up $1.02 at $44.62 a barrel by 3:39 a.m. ET, after settling down 91 cents at $43.60 a barrel on the New York Mercantile Exchange on Tuesday.

In the currency market, the U.S. dollar traded in the upper 88-yen range in late Tokyo deals. The dollar was quoted at 88.79-88.82 yen, down from 89.01-89.04 yen in early trade and Tuesday's close of 90.29-90.30 yen in Tokyo.

China's Yuan was slightly higher at 6.8370 per U.S. dollar compared to Tuesday's close of 6.84480.

The Hong Kong dollar was trading at HK$ 7.75 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

The Australian dollar closed 4.25% stronger as an unprecedented U.S. rate cut boosted the appeal of the local currency. The Aussie finished the domestic session at US$0.6980-0.6985 compared to Tuesday's close of US$0.6695-0.6700

The New Zealand dollar raced to a five-week high following the Federal Reserve's decision to cut interest rates more aggressively than expected. The kiwi finished the domestic session at US$0.5805, up from US$0.5790 in early trade and US$0.5586 at close on Tuesday.

The South Korean won strengthened against the U.S. dollar. The won finished the domestic session at 1,324.7 a dollar; extending its gains for a third day, compared Tuesday's close of 1,349.6 a dollar.

The Taiwan dollar ended session at NT$32.639 to the US dollar, compared with the previous close of NT$33 i.e. appreciation of 0.93%.

Coming back in equities, Japanese stock market managed to finish in positive terrain, recovering a portion of the losses posted in the previous trading session. The benchmark Nikkei 225 Stock Average gained 44.50 points or 0.52% to close at 8,612.52. The broader Topix index of all First Section issues on the Tokyo Stock Exchange closed up 9.84 points or 1.19% at 838.5. Investors are expecting a rate cut from Bank of Japan in its Thursday meeting.

On the economic front, Japan's Cabinet office said in a final report that the leading index declined to 85.2 in October from 89.2 in September. The October reading was revised up from 85.0. A year ago, the leading index was at 96.2. At the same time, the coincident index logged a reading of 97.7, down from 100.1 in September. It was revised up from 97.6 reported initially. The lagging index fell to 98.2 from 97.9 seen in September.

In Mainland China, the Chinese stock market extended its gains for the third day in a row by finishing only slightly higher. The benchmark Shanghai Composite Index rose 1.81 points or 0.09% to 1976.8, while the Shenzhen Composite Index rose 5.63 points or 0.94% to 607.39.

In Hong Kong, the share prices close higher as Hong Kong Monetary Authority (HKMA) slashed its base rate to a record low following US Federal Reserve decision. The central bank slashed the rate charged through its overnight discount window by 100 basis points to 0.50%, the lowest since the HKMA set up the base rate in September 1998. The market was also hoping that China would announce an interest rate cut or other economic stimulus measures following a Fed cut.

The Hang Seng index closed up 330.31 points or 2.18% at 15,460.52. The Hang Seng China Enterprises index was up 308.51 points or 3.83% at 8,372.26.

The Australian stock market closed higher, but pared back most of the early gains after Commonwealth Bank said that it is in the final stages of raising A$2 billion capital. After surging 2% at the opening bell, the benchmark S&P/ASX 200 finished up 14.4 points or 0.4% at 3,570.6. The broader All Ordinaries index advanced 16.1 points or 0.5% to at 3,515.0.

On the economic front, the leading economic index, published by Westpac Bank and Melbourne University's Institute of Applied Economic and Social Research, registered a decline to an annualized growth of 0.6% in October from the 1.1% growth reported for September and was down from the long-term average of 3.8%. The coincident index, measuring current economic activity, rose at an annualized rate of 1.6% in October, a slight increase from September's reading of 1.5%.

In other economic news, a report from the Australian Bureau of Statistics showed that merchandise imports in Australia increased a seasonally adjusted 2.0% in November compared to October. Meanwhile, data released by the Department of Education, Employment and Workplace Relations showed that Australia's index of skilled job vacancies fell a seasonally adjusted 15.9% in December from the previous month and was 48.2% lower than a year ago. The Housing Industry Association is scheduled to release its new home sales data for November later in the day.

The New Zealand stock market closed in positive territory for the second straight trading session on Wednesday. The market opened higher, tracking Wall Street's rally overnight on the back of a larger-than-expected Fed rate cut, but pared back gains over the course of the trading session to end flat. The benchmark NZ50 index closed up 0.85 point or 0.03% at 2,695.93 and the broader NZX All Capital index advanced 0.21 point or 0.01% to 2,740.56.

The South Korean stock market closed higher, led by financial stocks, as the U.S. Federal Reserve's historic interest rate cut buoyed investor sentiment. The benchmark Korea Composite Stock Price Index or Kospi closed up 8.19 points or 0.71% at 1,169.8.

In Taiwan, the stock markets closed higher after a massive rate cut from Fed supported by technology sector rally led by UMC after an announcement of major share purchase programme and DRAM shares rise on hopes of potential government rescue. Taiex, the benchmark index closed up 31.13 points or 0.67% at 4,648.02, its strongest finish since 11 December 2008.

In India, the key benchmark indices slumped in the closing trade as European stocks fell after early gains and on lower US index futures. At 15:42 IST, the BSE 30-share Sensex was down 261.69 points, or 2.62%, to 9,715.29. The Sensex rose 96.12 points at the day's high of 10,073.10 hit in early trade.

Elsewhere, Singapore, the Strait Times was down by 0.16% or 2.80 closing at 1779.29; Malaysia's KLCI closed up 0.9% at 862.50 and Indonesia's Jakarta composite closed the day down by 21.15 points or 1.57% higher at 1,363.98. In Philippines, the PSEi index gained 0.81% or 15.24 points to 1,904.56.

In other regional market, European shares fell today morning, as initial gains made after a steep rate cut from the U.S. Federal Reserve quickly faded, with BNP Paribas shares dropping sharply. On a national level, the U.K. FTSE 100 rose 0.1% to 4,313.50, the German DAX 30 index climbed 0.3% to 4,745.44 and the French CAC-40 index advanced 0.3% to 3,259.79.