Asian markets have fallen heavily in trading today (January 30th) after the US Federal Reserve announced it was cutting stimulus spending for a second month in a row.
The quantitative easing programme is being gradually wound down and the Fed has taken action in successive months since Janet Yellen replaced Ben Bernanke as the organisation's head.
Due to the improving economy in the US, the Fed revealed that it is to scale back its monthly bond-buying programme by a further $10 billion to $65 billion (£39 billion).
This announcement had an immediate impact on the state of Asian markets, with the Nikkei falling by three per cent in Japan on the back of the news. However, by the end of the session it had recovered somewhat and closed the day down 2.45 per cent compared to the start.
Australian stocks were down as well following the announcement by the Fed, falling by one per cent, while Hong Kong's Hang Seng dropped by 1.4 per cent when it opened.
US stocks down
It was a similar story in the US last night, with the two major indexes the Dow Jones and the S&P 500 both down one per cent as a result of the stimulus package being reduced.
South Africa's central bank surprisingly announced it would be raising interest rates for the first time in six years on Wednesday and this news also had a negative impact on global markets.
As a result, the Japanese yen and Swiss franc have both gained value against the US dollar as investors turned back to traditional safe havens with stocks markets falling in Asia.
Asian markets had bounced back from a four-day losing streak during trading yesterday, with the Nikkei up by more than two per cent to erase some of the losses sustained earlier in the month.
But January has proven to be a volatile month for Asian stocks as a whole, even though the Nikkei had a very successful 2013 and outperformed rivals such as the FTSE 100 and the Dow.
Learn about the Asian markets and CFD trading at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.