Though the 50-basis point rate cut by the US Fed capped months of eager anticipation and was delivered on the larger side of expectations, the US market indices did not reflect it at the end of trade. At 6:45 am (IST) on September 19, Dow Jones was 63.96 points up at 41,567.06, S&P 500 was 16.32 points down at 5,618.26 and Nasdaq was 54.76 points down at 17,573.30.
Nikkei up more than 2%
The Japanese index, however, reacted positively on Thursday morning. Japanese Nikkei was up 809.65 points (2.23%) and trading at 37,189.82 while the Taiwanese index was up 16.87% (0.08%) and at 21,695.71 points.
The major European markets where trading ended before the Fed decision was announced were all in the red. British index FTSE was down by 56.18 points to end at 8,253.68, the French CAC was also down by 42.52 points and reached 7,444.90 while the German DAX went down by 14.59 points to end at 18,711.49.
US markets jumped initially
Reports said that in the US, stocks rose to record high levels on September 18 before surrendering the gains. The Dow Jones Industrial Average leaped 375 points to a record level but ended the day recording a 103-point loss at 41,503 (or down 0.3%.)
“We really need to see how the market reacts tomorrow — it takes time to digest all of that…. The markets were crossing their fingers for a larger cut,” Ryan Sweet, chief U.S. economist at Oxford Economics, was quoted in the media explaining the behaviour.
IT sector bullish
In India too, some experts pointed out on September 18 that while a rate cut is likely to boost the sentiment of investors, if it is viewed as a measure to stave off recessionary apprehensions, it might not work well for the sentiments.
However, brokerages were bullish about the impact of a rate cut especially on IT stocks and JM Financial gave a BUY call on stocks such as Infosys and Wipro which would benefit if the cost of borrowing comes down in the US leading to increased IT spending. Banking stocks are also expected to benefit.
Experts said that markets take time to digest a 50 basis point rate cut and investors might take time to interpret its full implications. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
