Global Stocks Fall as the Fed Surprises Markets

Federal Reserve raises interest rates, signals fewer hikes ahead

Federal Reserve raises interest rates, signals fewer hikes ahead

The reasons for pessimism are well known: the withdrawal of monetary stimulus led by the Federal Reserve; the simmering US-China trade war; and signs of a regime change in markets as a long period of calm gives way to a surge in volatility.

Tokyo stocks tumbled Thursday, with the benchmark Nikkei average falling to its lowest level in about 15 months after the U.S. Federal Reserve raised rates as expected and kept most of its guidance for additional hikes next two years, dashing investor hopes for a more dovish policy outlook.

Powell said that three years ago the committee came to the view that the best way to achieve Fed's mandate was to gradually move interest rates back to levels that are more normal in a healthy economy. But financial analysts paid closer attention to changes in the Fed's forward-looking guidance on future rate increases, with the US economy showing some signs of sluggishness in recent weeks.

USA markets are cooling after "years of outperformance" and working off "overvaluation in some areas" such as major tech companies, said Shane Oliver of AMP Capital in a report. The Fed said in statement "job gains have been strong", the unemployment rate has remained low and inflation remains at near 2 percent.

Benchmark oil tumbled more than 4.5 per cent, dragging the United States dollar lower too. They also forecast one rate hike in 2020.

The statement the Fed issued Wednesday after its latest policy meeting said that only "some" further gradual rate increases are likely; previously, it spoke simply of "further gradual increases".

The Fed expressed confidence in the US economy, saying economic activity "has been rising at a strong rate" and the labor market "has continued to strengthen", according to the statement.

Today in the morning both the dollar and the yield markets of long-term USA government bonds show a decline which, by the way, is rarely sustainable.

"The economy has continued to perform well", Fed Chairman Jerome Powell said at a news conference.

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This point of view was echoed and hit even more strongly by Keane, who was making his Sky Sports punditry debut ahead of the game. But you just see that little thing this week and I thought "not this week, not this week, it's Liverpool ".

Wednesday's quarter-point increase, to a range of 2.25 percent to 2.5 percent, lifted the Fed's benchmark rate to its highest point since 2008. Wren said investors want to know that the Fed is keeping a close eye on the situation.

"The Fed still sees a solid underpinning for the economy based on the numbers and still sees the viability of two rate hikes next year", said Quincy Krosby, chief market strategist at Prudential Financial, in this CNBC report.

On Wednesday, officials did cut their forecasts for economic growth in 2019 to 2.3 per cent, down from the 2.5 per cent they anticipated in September. The S&P 500 Index is down almost 13 percent since the start of October. The fear is that optimism could translate into more rate hikes in the future.

The Fed's move, in spite of warnings from President Trump, seems certain to anger him.

The dollar initially gained as the Fed was seen as more hawkish but it lost steam against other safe-haven currencies, such as the yen.

Mnuchin said the market overreacted, with computerized program trading taking over and driving stock prices down further. It dropped 7 percent Tuesday and closed at a 16-month low, and has fallen nearly 40 percent since October 3.

Trump has sought to induce the Fed to keep interest rates low during his presidency.

The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

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