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Nikkei Markets

Asian stocks decline on uncertain Fed outlook on rates

Energy related stocks extend losses as crude oil price eases

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan declined Thursday as investors assessed the latest policy reviews of the U.S. Federal Reserve and the Bank of Japan.

The Nikkei Asia300 Index of companies outside Japan fell 0.6% to 1,266.59.

The Fed yesterday once again cut rates by a quarter percentage points to 1.75%-2%, citing muted inflation and uncertain economic outlook. The central bank reiterated that it will assess incoming data and "act as appropriate" to sustain the ongoing expansion.

While the Fed's easing was supportive of risk appetite, the closely followed Fed dot plots doused a bit of the investor enthusiasm. The Fed's new dot plot showed that the median projection was for no further rate cuts for the rest of this year and for 2020.

According to the dot plot, 10 of the 17 policymakers expect the rates to remain at no less than the present level for the rest of this year. Nine out the 17 anticipated that the rates would be 1.75%-2.00% or higher at the end of 2020.

The dollar index rose yesterday following the Fed decision. The Treasury yield curve flattened and near-term yields rose.

Meanwhile, the Bank of Japan earlier Thursday left its key policy rate, the 10-year yield control target, and the forward guidance unchanged, in-line with expectations.

The central bank hinted that it could possibly ease policy further at its next meeting in October, saying that in light of increasing risks of a slowdown in global economies, it will reexamine economic and price developments at the next meeting when the outlook will be updated.

If the Bank of Japan expands its stimulus next month, it will join several other central banks around the world that have stepped up monetary support.

Analysts have primarily blamed the U.S.-China trade dispute for the ongoing worries over the economic outlook. While there has been progress in the attempt to reach a deal in recent weeks, the prospects remain uncertain.

On Thursday, Chinese companies were the biggest contributors to losses on the A300 gauge. Ping An Insurance Group dropped 1.1% and Industrial & Commercial Bank of China lost 0.9%.

Heavyweight Tencent Holdings slipped 1.3%, while China Shenhua Energy declined 1% following a 5.2% fall in August coal sales volume.

Energy related shares extended yesterday's losses amid a further pullback in crude oil prices. Brent crude declined yesterday to add to Tuesday's 6.5% fall amid easing worries over Saudi Arabia's output. CNOOC lost 0.8%, PetroChina fell 1.9%, and Keppel Corp. declined 0.8%.

Sime Darby Plantation, a unit of Malaysian conglomerate Sime Darby, fell 1.2% amid broader losses in the shares of planation companies. Malaysian Prime Minister Mahathir Mohamad suggested that he may have to bring in a law forcing companies to tackle fires on the land they control abroad.

--Nimesh Vora

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