Post-Fed trades fade as U.S. stocks, bonds retreat.Trades sparked by the Federal Reserve’s dovish tone partially unwound Thursday, as U.S. stocks slumped after the best gain in two weeks and Treasury yields edged higher following an 11-point tumble.
The dollar slipped.The S&P 500 Index’s post-Fed rally ran out of steam after the index climbed within 0.5 percent of an all-time high.The Fed raised its benchmark lending rate a quarter point without accelerating the timetable for future hikes.Just hours after the Fed’s decision, the BOJ left its plans unchanged, increasing the policy divergence between the two central banks.
China’s central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the U.S. The Swiss National Bank kept its deposit rate at an historic low and reaffirmed its threat to intervene to keep a lid on the franc. Turkey’s central bank raised a key interest rate to rein in inflation.
G-20 is said to be stuck on trade language after German nod to U.S.Some Group of 20 nations refused a German compromise on free-trade language that was aimed at accommodating U.S. concerns as finance ministers and central bankers meet in the spa town of Baden-Baden.
Negotiators from countries including France, the U.K., Italy, Brazil and Singapore — as well as the European Commission — rejected a proposal that dropped a commitment to “multilateral” and “rule-based” trade,asking not to be named because the proceedings are private.
The U.S. had requested the changes, and asked that a reference to â€œfairâ€ international trade to be included.Instead, the debate has moved on to an annex proposed by the German G-20 presidency on the principles for building resilience in the global economy.
The Bank of Japan remained on hold at its March meeting, keeping its yield-curve control policy and pace of asset purchases unchanged.
The Bank of Japan remained on hold at its March meeting, keeping its yield-curve control policy and pace of asset purchases unchanged. Conditions around the world have helped the BOJ in recent months.
Yet in its statement yesterday, the central bank lacked any bullishness on projections for reaching 2 percent inflation, which it sees arriving sometime in the fiscal year that starts in April 2018. It concedes that right now, inflation expectations are still weakening.
Bank of England policy maker Kristin Forbes voted for an interest-rate increase and some others indicated they may not be far behind her.The bank kept the benchmark interest rate at a record low 0.25 percent in an 8-1 vote and unanimously decided to leave the bond-purchase programs unchanged yesterday.
China’s central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the Federal Reserve in tightening policy.Hours after the Fed’s quarter percentage-point move, the People’s Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility.
The central bank said markets expected higher borrowing costs and that open-market rate increases don’t necessarily equate to interest-rate hikes, according to a statement. With the economy steady, inflation rising and real lending costs going down, financial institutions have strong incentives to expand credit, and housing prices have surged in some cities, it said.
China’s capital controls are biting, but that doesn’t mean policy makers can relax. This year, the stakes are high. Officials have pledged stability in the currency market as a twice-a-decade Communist Party leadership reshuffle looms. Memories of 2016’s equity selloff, which whipsawed trading globally at the start of the year, are also fresh.
Market in Details
The Bloomberg Dollar Spot Index lost 0.2 percent after its 1.3 percent post-FOMC drop.The dollar slid to a six-week low, extending Thursday’s losses, after the Federal Reserve disappointed traders seeking signals that the central bank would ratchet up the pace of interest-rate increases.Markets now pricing just one and a half Fed hikes in 2017 and two in 2018, discounting the dot plot, which remained unchanged at three hikes for both years,which also weaken dollar.
EUR/USD reverse decline,touching a five-week high at $1.0768.
GBP/USD erased an earlier decline to trade 0.6 percent higher at $1.2363. The pound climbed after Bank of England policy maker Kristin Forbes voted for an interest-rate increase.
USD/JPY little changed at 113.44 after an initial morning selloff, range 113.16/55.
The Bank of Japan kept its unprecedented monetary easing program unchanged yesterday, just hours after the Federal Reserve raised its key interest rate.
AUD/USD dropped 0.4% to 0.7681 after jumping 2% Wednesday when it reached 0.7719, highest since Feb. 24 due to slumps on jobs data miss (employment fell 6,400 in Feb).
The yield on 10-year Treasuries rose four basis points to 2.53 percent after the rate dipped below 2.50 percent following the Fed decision. It traded above 2.60 percent earlier in the week.
French bonds reversed earlier gains that had pushed the yield on the 10-year note six basis points lower. The benchmark yield traded five basis points higher at 1.092 percent.
Spanish and Italian 10-year bond yields rose at least six basis points, while the yield on the German benchmark bund added three basis points to 0.45 percent.
U.S. stocks slid as investors assessed the Federal Reserve’s path for interest rates and utility and health-care shares weighed on the market.S&P 500 lost 0.2% to 2381.Dow Industrials fell 16 to 20,935.Tech companies up 0.2%.
European stocks rose after the Federal Reserve raised interest rates without speeding up its timeline of further hikes, while election results in the Netherlands spurred investor relief over the defeat of its populist party.Stoxx 600 up 2.63 points at 377.7.Dax up 0.6% at 12,083 FTSE 100 up 0.6% at 7,415.95.Stoxx Banks SX7P up 0.9% at 179.93.
West Texas Intermediate slipped 11 cents to settle at $48.75 a barrel and Brent fell 7 cents to close at $51.74.
Gold futures for April delivery advanced 2.2 percent to settle at $1,227.10 an ounce in New York, poised for the biggest gain for a most-active contract since June 24.