TOKYO (Reuters) – Asian shares fell on Thursday after the US Federal Reserve cut interest rates as expected, but this was a stronger signal of further policy easing.
FILE PHOTO: A man sits in front of a screen displaying stock market information of a brokerage house in Jinhua, Zhejiang Province, China, August 2, 201
MSCI's broadest index for Asia-Pacific equities outside Japan fell 0.36%. Hong Kong shares fell 0.96%, while the Japanese Nikkei gained 1.01%.
The yen rose from a seven-week low against the dollar and held on to these gains after the Bank of Japan put the policy on hold as expected, but signaled that it could ease off next month.
Central banks around the world have relaxed their policies to counter the risks of low inflation and a recession. The easier monetary policy has generally supported stocks.
However, some analysts argue that a rally in the bond markets has gone too far and yields have fallen too fast and the curves are too flattened. Others are worried about the growing debt with negative returns.
"This is a small plus for stock prices as long as there is no recession," said Shane Oliver, investment strategy and chief economist at AMP Capital Investors in Sydney.
"The only problem is that a cut of 25 basis points was already expected and the comments and forecasts for the dot charts were not as cautious as the market had hoped. I think the Fed will have to cut again. The yield curve still carries some risks. "
US. Stock futures fell 0.23% on Thursday in Asia. The S & P 500 reversed losses, gaining 0.03% after Powell said it saw no impending recession or that the Fed would accept negative interest rates.
The Fed lowered interest rates this year for the second time to between 1.75% and 2.00% in a 7: 3 vote, but signaled that further reductions are unlikely as the labor market remains strong.
The interest rate cut was widely expected, but the split vote raised some concerns about predicting the future monetary policy stance.
So-called dot-plot forecasts from all 17 policymakers showed even wider disagreements: Seven expected a third rate cut this year, five saw the current rate cut as the last for 2019, and five seemed to have opposed Wednesday's move.  The 10-year benchmark Treasury yield rose to 1.8013% while the 2-year yield rose to 1.7703%.
The spread between two- and ten-year Treasury yields, the most commonly used measure of the yield curve, was almost the lowest since September 9th.
The curve reversed on 14 August for the first time since 2007 If long-term yields were below short-term yields, this is a generally accepted indicator of an impending recession.
The Australian dollar fell 0.5% to $ 0.6793 after data showed that the country's unemployment rate had edged up to 5.3% in August, strengthening the central bank's expectations of a rate cut.
The yen rose 0.3% to $ 108.14 per dollar.
The BOJ maintained its promise to set short-term interest rates at minus 0.1% and yields for 10-year government bonds at around 0%.
Investors will closely watch BOJ Governor Haruhiko Kuroda's press conference later Thursday to assess how he views the risks to Japan's economic outlook.
US. Crude oil futures rose 0.24% to $ 58.25 a barrel. The oil markets have stabilized after attacks in Saudi Arabia over the weekend triggered a supply shock and led to higher prices. However, volatility remains a risk as tensions in the Middle East remain high.
Washington blamed Iran for the attacks, an accusation that Tehran rejects. US Secretary of State Mike Pompeo said the strike was "a war effort".
The pound sterling stood at 88.50 pence per euro, near the highest level since 30 May. The pound has barely changed at $ 1.2467.
Investors are waiting for a meeting of the Bank of England's policy later this Thursday. The BOE is expected to keep interest rates unchanged, but uncertainty over Britain's exit from the European Union has made monetary policy prospects more difficult.
Editorial staff of Sam Holmes & Shri Navaratnam