Asian markets down after Fed stimulus announcement

The US Federal Reserve is cutting stimulus again.

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By :  ,  Financial Analyst

Asian markets have fallen heavily in trading today (January 30th) after the US Federal Reserve announced it was cutting stimulus spending for a second month in a row.

The quantitative easing programme is being gradually wound down and the Fed has taken action in successive months since Janet Yellen replaced Ben Bernanke as the organisation's head.

Due to the improving economy in the US, the Fed revealed that it is to scale back its monthly bond-buying programme by a further $10 billion to $65 billion (£39 billion).

This announcement had an immediate impact on the state of Asian markets, with the Nikkei falling by three per cent in Japan on the back of the news. However, by the end of the session it had recovered somewhat and closed the day down 2.45 per cent compared to the start.

Australian stocks were down as well following the announcement by the Fed, falling by one per cent, while Hong Kong's Hang Seng dropped by 1.4 per cent when it opened.

US stocks down

It was a similar story in the US last night, with the two major indexes the Dow Jones and the S&P 500 both down one per cent as a result of the stimulus package being reduced.

South Africa's central bank surprisingly announced it would be raising interest rates for the first time in six years on Wednesday and this news also had a negative impact on global markets.

As a result, the Japanese yen and Swiss franc have both gained value against the US dollar as investors turned back to traditional safe havens with stocks markets falling in Asia.

Asian markets had bounced back from a four-day losing streak during trading yesterday, with the Nikkei up by more than two per cent to erase some of the losses sustained earlier in the month.

But January has proven to be a volatile month for Asian stocks as a whole, even though the Nikkei had a very successful 2013 and outperformed rivals such as the FTSE 100 and the Dow.

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