By Paul J. Davies 

Asian and European stocks showed a mixed reaction on Thursday to the U.S. interest rate decision the previous day when Wall Street benchmarks ended lower.

The Hang Seng in Hong Kong gained 0.8% and South Korea's Kospi Index rose 0.4%, but the Stoxx Europe 600 was down 0.4% at the start of trading and the FTSE 100 in London fell 0.5%.

Investors in Asia took a more positive message on the health of the U.S. and global economies from Federal Reserve Chairman Jerome Powell's press conference than U.S. markets had the night before.

The central bank left interest rates unchanged and its initial policy statement appeared to emphasize weaker-than-expected inflation, which prompted U.S. stocks to rally and government bond yields to fall on the idea that future interest-rate cuts were more likely.

However, Mr. Powell's later press conference highlighted short-term explanations for soft inflation and he stopped short of endorsing a rate cut when pushed on how he would respond to further weak data.

"He also spoke positively about the growth outlook in China and Europe, and said that financial conditions are accommodative," said Jim Reid at Deutsche Bank. "All in all, he sounded more optimistic about the economy than expected."

The S&P 500 ended the day down 0.8% and the Dow Jones Industrial Average was 0.6% lower. However, futures markets pointed to a better opening for both on Thursday with increases of slightly more than 0.1% priced in.

The outlook for healthier economies along with the downbeat news of rate cuts appearing less likely presented a balanced outlook for markets. Signs that better growth was winning out and encouraging risk taking were evident in government bond yields Thursday morning where yields were lifted as prices fell.

The 10-year U.S. Treasury yield was 2.527% Thursday morning from 2.510% Wednesday, while the German 10-year bund yield also moved further into positive territory to 0.023% from 0.016%.

On the other hand, the U.S. dollar, which had strengthened marginally late on Wednesday, weakened again Thursday morning with the WSJ Dollar Index down 0.03%.

In commodities, Brent crude oil slipped 0.5% to $71.81 a barrel, and gold fell 1% to $1.273.20 per ounce.

Write to Paul J. Davies at paul.davies@wsj.com

 

(END) Dow Jones Newswires

May 02, 2019 04:16 ET (08:16 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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