Global shares flat, US yields fall after Fed delivers rate hike
NEW YORK – Global shares were mostly flat while U.S. yields fell on Wednesday after the Federal Reserve delivered its 11th consecutive hike in interest rates aimed at reining in rising consumer prices.
The rate hike, which was in line market expectations, took the benchmark overnight interest rate to between 5.25 percent and 5.5 percent – the highest level since around the global financial crisis in 2007-2009.
The Fed also left open the door for more rate hikes, stating that it would keep studying economic data as it determines “the extent of additional policy firming that may be appropriate” to reach its 2 percent inflation target.
During his press conference, Fed Chair Jerome Powell said central bank staff are no longer forecasting a U.S. recession, and “we do have a shot” for inflation to return to target without high levels of job losses.
“It was exactly what the market was anticipating, almost like a non-event with markets dead flat,” said Lamar Villere, portfolio manager at Villere & Co in New Orleans.
“It’s our sense that the way inflation data has been coming in and the way the Fed has been slowing the pace of hikes, that they’re looking to stop,” Villere added
The MSCI world equity index, which tracks shares in nearly 50 countries, rebounded shortly after the Fed announcement and was up 0.03 percent. In Europe, stocks fell 0.53 percent, snapping a six-day winning run, with equities in Germany and France shedding 0.49 percent and 1.35 percent respectively.
On Wall Street, the benchmark S&P 500 lost steam and finished flat while the tech-heavy Nasdaq closed lower, dragged down by mostly technology stocks.
The Dow Jones Industrial Average rose 0.23 percent to 35,520.12, the S&P 500 lost 0.02 percent to 4,566.75 and the Nasdaq Composite dropped 0.12 percent to 14,127.28.
“Powell and the committee are taking a very data-dependent approach to future rate hikes,” said Angelo Kourkafas, investment strategist at Edward Jones. “He kept very close to the script. It didn’t sound as hawkish as some had feared and wasn’t a strong message to push expectations one way or the other.”
U.S. Treasury yields slipped in choppy trading after the Fed’s rate decision. The yield on 10-year Treasury notes was down at 3.865 percent, while the two-year yield, which typically reflects interest rate expectations, fell to 4.8433 percent.
The dollar edged lower against major currencies. The dollar index fell 0.316 percent, with the euro up 0.33 percent to $1.109.
Oil prices settled lower as data showed U.S. crude inventories fell less than expected. Brent crude futures settled down 0.92 percent to $82.92 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 1.1 percent to $78.78.
Gold prices gained buoyed by a pullback in the dollar and bond yields. Spot gold added 0.5 percent to $1,973.53 an ounce, while U.S. gold futures gained 0.50 percent to $1,968.90 an ounce.