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ASX 200 falls 32 points as the US Fed cuts rates to 2.25%

US Fed Chairman Jerome Powell’s comments that this was ‘not the beginning of a long series of rate cuts’ were not well received by investors. American and Australian equities fell heavily in response.

The ASX 200 has followed American markets down in morning trade, as investors continue to digest the US Federal Reserve’s decision to cut interest rates.

The ASX 200 was down as much as 32 points – or 0.5% during the opening session of trade.

The US Federal Reserve’s decision in focus

Overnight, the US Federal Reserve cut interest rates by 25 basis points – taking the US Federal Funds rate to 2.25%.

This was the first time that the Fed has cut interest rates since the GFC.

Investors baulked at the Fed’s decision: the NASDAQ fell 98 points, while the S&P500 dropped 32 points.

Why the selloff?

It was not the rate cut in and of itself that drove the sharp selloff in equities overnight and this morning, but rather it was Fed Chairman Jerome Powell’s coments that this was ‘not the beginning of a long series of rate cuts.’

Indeed, as IG’s market analyst, Kyle Rodda pointed out this morning:

‘Recent bullish activity has been underpinned by the notion that the Fed would be beginning an easing cycle from this meeting onwards. Last night’s Fed decision’s commentary has meant that this is less than assured.’

US President Donald Trump, in response to the Fed’s interest rate decision, provocatively tweeted:

‘As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place - no inflation.’

The impact on Australian equities: ASX 200 drops

As the blue-chip index has a habit of doing, the ASX 200 followed America’s markets down in the opening hour of trade – dropping as much as 32 points.

Shares in the Commonwealth Bank of Australia were down 1.08% at the open; and although ANZ opened lower, shares in the big four bank are currently up 0.66%.

Blue-chip iron ore miners also suffered, with BHP, Rio Tinto and Fortescue Metals Group all trading lower after the open.

Rio Tinto Ltd's share price cratered 1.35%, even as the company prepares to announce its half-year results after the market close, 16:15 AEST.

Adelaide Brighton’s share price also continued to fall – dropping a further 3.39% following yesterday’s horror 19% decline off the back of a profit guidance downgrade.

It wasn't all losses mind you. Counter-cyclical Nufarm was the best-performing ASX stock in the morning session, rising 7.36%.

Click here to read IG market analyst Kyle Rodda’s in-depth analysis of the US Federal Reserve’s interest rate decision.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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