Asian markets stung by Fed pessimism
BANGKOK (AP) — Asian stocks opened lower Thursday, stung by a pessimistic assessment of the U.S. economy by the Federal Reserve.
Japan's Nikkei 225 slumped 1.6 percent to 8,598.32 while South Korea's Kospi index slid 2.6 percent to 1,806.62. Australia's S&P ASX 200 was 2.2 percent down at 3,984.40.
In a highly anticipated move, the Fed on Wednesday announced it would buy Treasury bonds to help the U.S. economy. But Wall Street stocks fell anyway because the U.S. central bank made it clear that a full U.S. economic recovery was likely years away.
The Dow Jones industrial average lost 2.5 percent to closed at 11,124.84. The Standard & Poor's 500 index fell 2.9 percent to 1,166.76. The Nasdaq composite fell 2 percent to 2,538.19.
The Fed said after a two-day meeting that it would buy long-term Treasurys and sell short-term ones to help the economy regain momentum. It surprised investors when it said it would include more 30-year bonds in its purchases than expected.
The Fed said it would buy $400 billion in 6-year to 30-year Treasurys by June 2012. Over the same period, it planned to sell $400 billion of Treasurys maturing in 3 years or less. The move is intended to drive down interest rates on long-term government debt, and could lower rates on mortgages and other loans.
The inclusion of more 30-year bonds than expected means the Fed saw the need to keep very long-term rates lower for an extended period. Many analysts viewed the move as an acknowledgment that the U.S. economy's problems are long-term.
The Fed also bleakly stated that the economy has "significant downside risks" and that a number of problems won't be easily solved, including high unemployment and a depressed housing market.
Meanwhile, the price of oil continued its slide on expectations that there'll be less demand for energy because of the economy.
Benchmark crude for October delivery was down $1.53 per barrel to $84.39 on the New York Mercantile Exchange. The contract fell $1.00 to settle at $85.92 on the Nymex on Wednesday.