Asia, Europe Present Mixed Reaction to Fed; Fiat, Peugeot Confirm Merger Deal

Asian and European shares traded mixed on Friday after a tentative reaction from investors to the third interest rate cut this year by the U.S. Federal Reserve late Wednesday. U.S. futures are showing similar results after rallying into the close after Fed Chair Jerome Powell said the central bank would not raise interest rates until he saw a sustained and significant uptick in inflation.

On Wednesday, the Fed cut its benchmark interest rate 25 basis points as widely expected. It also indicated the possibility of a pause in easing monetary policy. In doing so, policymakers said they “see the current stance of monetary policy as likely to remain appropriate.”

After the release of the interest rate and monetary policy statements, Powell stressed that any future move to increase borrowing costs would have to be preceded by a meaningful and consistent uptick in inflation, the rate at which prices rise in the U.S. economy. That could mean a long wait until the next hike, with the Fed’s preferred inflation gauge showing little signs of breaking out anytime soon.

Asia

In South Korea, Samsung Electronics reported earnings that were better than guidance given by the firm earlier in October. Operating profit for the three months ending in September plunged 56% as compared to the same period a year ago.

In Japan, the Bank of Japan (BOJ) announced Thursday that it would be keeping monetary policy steady, but signaled in its forward guidance a readiness to cut rates if required.

In China, factory activity contracted for the sixth straight month in October. The official Purchasing Managers’ Index (PMI) came in at 49.3 for October. Non-Manufacturing PMI fell to 52.8 from October, down from September’s 53.7 reading.

Europe

In the United Kingdom, Prime Minister Boris Johnson and main opposition leader Jeremy Corbyn begin their first full day of campaigning Thursday ahead of what promises to be a historic December election. The U.K. is to hold a December general election for the first time since 1923 in a bid to break the Brexit impasse.

Peugeot (PSA) and Fiat Chrysler (FCA) confirmed their intention to merge on Thursday, in what would be a 50-50 share swap and create the world’s fourth-largest carmaker.

“Discussions have opened a path to the creation of a new group with global scale and resources owned 50% by Groupe PSA shareholders and 50% by FCA shareholders,” they said in a statement on Thursday morning.

In a rapidly changing environment, with new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage its strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency.”