2014.07.3106:08:16UTC+00Emerging stocks drop, bonds dip on Fed decision

Emerging-market stocks dipped in the trading as the world’s largest smartphone maker, Samsung Electronics Co. went to its lowest in seven weeks along with crude oil which approached its monthly loss. Asian bonds also decreased as the Federal Reserve announced that it is going to warily keep the rates lowered.

The MSCI Emerging Markets Index shed 0.5% by 1:07 pm, Tokyo time. This cut what’s supposed to be the index’s six month increase. Samsung Electronics Co. declined by 3.8% on worse-than-expected earnings report. Japan’s Topix is in positive territory with a 0.2% increase while South korea’s KOSPI Index dropped 0.4%, retreating on what was supposed to be a three-year high. Australia’s ten-year bonds surged by nine basis points as India’s rupee along with South Africa’s rand depleted.

The recent meeting between Fed officials had yielded decisions for the future of the bank. One of their measurements is to cut bond buying by $10 billion for the sixth consecutive time. They cited a “significant underutilization of labor resources” ahead of the jobs data on Friday. This was interpreted by market participants as the Fed being wary of increasing the interest rates too soon. This, despite the 4% growth of the US economy for the second quarter.

Bond trader at Bank of Nova Scotia’s Scotiabank, Ali Jalai commented that the prospects for the US economy in the second half of the year seems okay and looks like its “steady as she goes.” Jalai adds that the market has been long since sold off that’s why there is a chance that prices might be lowered further.