Tuesday, August 4, 2020
Martin Hennecke

Fed pledges to prop up virus-hit economy
Global shares fell yesterday, although the US Federal Reserve repeated a pledge to use a "full range of tools" to support the economy, keeping the interest rate near zero. Hong Kong's Hang Seng Index rose more than 1 percent in the morning session, boosted by the Fed's pledge. But the market erased gains in afternoon trading, ending 0.69 percent, or 172.55 points lower at 24,710.59, reflecting fragile investor sentiment amid rising Sino-US tensions and surging virus cases. China shares also closed lower yesterday, with the blue-chip CSI300 index ending down 0.5 percent to 4,656.15. European stocks fell to a three-week low, and US stocks slumped with Dow Jones Industrial Average opening more than 1 percent lower last night, as official data showed gross domestic product collapsed at a 32.9 percent annualized rate last quarter, the deepest decline in output since the government started keeping records in 1947. A separate report showed the number of Americans filing for unemployment benefits increased for a second straight week. Initial claims through regular state programs rose to 1.43 million in the week ended July 25, up 12,000 from the prior week, the Labor Department said. Fed chair Jerome Powell said on Wednesday the surge in US virus cases was beginning to weigh on economic activity and promised the US central bank would "do what we can" to limit damage and boost growth. Powell's comments, made after the Fed announced its policy decision to leave the target range for short-term rates between 0 percent and 0.25 percent, suggest dimming hopes of a quick economic rebound. Liquidity in the Hong Kong banking system remains ample and foreign exchange and money markets have continued to operate smoothly, said Hong Kong Monetary Authority's spokesman. The strong-side Convertibility Undertaking under the Linked Exchange Rate System has triggered the thirtieth time since April, the spokesman said. The repeated triggering of the strong-side Convertibility Undertaking has led to over HK$109 billion of funds flowing into the Hong Kong dollar.

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