Asia stocks slip as Fed warns of 'uncertain' outlook

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markets

Asian markets mostly dropped Thursday following a broadly negative lead from Wall Street after the head of the Federal Reserve warned of an "uncertain" outlook for the US economy and stressed the need for fresh stimulus.

While the central bank indicated interest rates were unlikely to begin rising for another three years, allowing businesses to borrow at ultra-low levels, Jerome Powell's call for more fiscal help came with US lawmakers unable to find common ground on a new package.

Donald Trump also sowed some confusion after claiming a vaccine could be available as soon as next month, directly contradicting the head of the Centers for Disease Control and Prevention, who had given a timeline of mid-2021.

Fed boss Powell told reporters that while the recovery was looking better than anticipated, "overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain".

"It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year," he said. "My sense is that more fiscal support is likely to be needed."

Talks on a new rescue bill have been stuck in the mud for weeks, with both sides digging in their heels and swapping the blame, though Democratic House Speaker Nancy Pelosi and White House chief of staff Mark Meadows each made encouraging statements about the potential to break the impasse.

Trump on Wednesday tweeted that Republicans - who last week put forward a $500 billion proposal - should "go for the much higher numbers", suggesting he is keen to reach an agreement with Democrats, who are aiming for $2 trillion.

'Bipartisan politics'

"The onus on creating growth and inflation does really fall to fiscal policy and the bipartisan politics in Washington means that a new stimulus package may not eventuate until the new year," said JP Morgan Asset Management strategist Kerry Craig.

But he did add: "Even with the risk of a delayed fiscal package, more fiscal support will be delivered. Along with easy financial conditions and a low rate outlook for the next couple of years, that should maintain a supportive backdrop for risk assets and downward pressure on the US dollar."

Wall Street saw fresh losses, with the Nasdaq down more than 1% as tech giants took another hiding. And Asia mostly followed suit.

Hong Kong, Sydney and Seoul all lost more than one percent while Tokyo, Shanghai, Singapore, Taipei, Manila, Bangkok and Jakarta were also well down.

Wellington shed 0.5%, a limited drop despite data showing New Zealand's economy fell into recession for the first time in a decade after a record 12.2% contraction in the second quarter.

London, Paris and Frankfurt all lost more than one percent in opening exchanges.

Oil prices dropped, a day after chalking up big gains of more than four percent. That came on the back of the dovish Fed, a surprise plunge in US stockpiles to levels not seen since April and news that Hurricane Sally prompted some petroleum producers in the Gulf of Mexico to curtain production.

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