Stocks soar after Federal Reserve announces pull-back

Asian Stocks Slip Before Fed Yuan Extends Gains Markets WrapMore

Asian Stocks Slip Before Fed Yuan Extends Gains Markets WrapMore

USA stocks rallied after the outcome, treasury yields fell, while the dollar sank.

President Trump, meanwhile, has been an outspoken critic of the Fed's interest rate hikes. In early October, Powell indicated the Fed was far from reaching a neutral fed-funds rate, setting the stage for the risk markets' swoon. Its portfolio reflects purchases the Fed made after the Y 2008 financial crisis to help keep borrowing rates down and stimulate the economy.

The Fed held rates steady and chairman Jerome Powell said the central bank would be patient with hikes.

Hong Kong and Shanghai were also up as a gauge of factory activity in China improved slightly in January from last month.

MSCI's All Country World Index, which tracks stock markets in 47 countries, came off its highest level since December 4 after its best January gain on record - up 7.79 per cent on the month.

Read: There is no need to worry about rising prices.

Conspicuously absent from the Fed's statement was language about future rate hikes. On Wednesday, there was no mention of tightening.

On Wednesday, the Fed maintained its target range for the federal funds rate at 2.25 to 2.50 percent.

Read: We're good for now.

Its "decision will reinforce expectations that the Fed is nearly done raising interest rates", Michael Pearce, senior USA economist, Capital Economics, said in a research note.

The US Justice Department just unveiled 23 criminal charges against Huawei
Ms Meng, 46, the company founder's daughter, has been under house arrest in Canada after being detained on December 1 at the... A grand jury in the Eastern District of NY returned charges of conspiracy to obstruct justice against Huawei and Huawei USA.

For the S&P 500, it was the biggest one-day gain on the final day of a Fed meeting since December 2014, according to Dow Jones Market Data.

"We are now facing a somewhat contradictory picture of generally strong USA macroeconomic performance, alongside growing evidence of cross-currents", Powell told reporters.

"Over the past few months we have seen some cross-currents and conflicting signals", he said, citing slowing growth in China and Europe, ongoing trade negotiations, the partial government shutdown in the USA, and the tightening of financial conditions in late 2018.

"European shares are down in the red and USA stock futures are flat and we need to see further signs of weakness from the USA economy before aggressively selling the dollar", said fund manager Constantin Bolz of wealth manager Portfolio Concepts. Hence, the growing evidence of cross-currents pushed the Fed to become more patient awaiting greater clarity.

In the last meeting in December, Fed policymakers penciled in two rate increases in 2019 as the bank conducted a fourth rate hike for 2018. He didn't comment on the Fed's actions on Wednesday, but he did tweet "Dow just broke 25,000". The DJIA rose by 1.77 percent on the session with the NASDAQ climbing 2.20 percent.

The Norwegian krone, Australian dollar and the New Zealand dollar have all gained roughly 2 percent against the dollar in January.

It may not be long before that record is broken.

While the FOMC statement characterized the economy as "solid", Evercore ISI Wednesday sent clients a note entitled "Disturbing Economic Air Pockets" listing "disturbing" indicators around the globe, from China and Australia to the U.S. Many analysts also have pointed to a marked divergence in the Conference Board's measures of consumers' positive view of present economic conditions and the marked decline in expectations about the future.

The economic impact of the partial government shutdown will be among topics Powell will face at his news conference, in addition to the global slowdown, the US-China conflict and Britain's struggles to achieve a smooth exit from the European Union.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.