BANGKOK (AP) – Shares slipped in Europe yesterday after gains in most Asian markets following an interest rate hike by the Federal Reserve.
United States (US) futures fell, while oil prices jumped more than USD1 a barrel.
The Fed’s latest hike, by three-quarters of a percentage point, lifts the benchmark short-term rate to its highest level since 2018. The aim is to bring surging inflation under control.
Analysts said that after going backward from January through March, the US economy probably didn’t do much better in the spring.
Investors also are awaiting a call between US President Joe Biden and Chinese leader Xi Jinping.
Germany’s DAX slipped 0.4 per cent to 13,119.96 and the CAC 40 in Paris was down two points at 6,255.76. Britain’s FTSE 100 edged 0.2 per cent lower to 7,333.16.
The future for the S&P 500 was 0.4 per cent lower while that for the Dow industrials edged down 0.2 per cent.
In Asian trading, Hong Kong’s benchmark Hang Seng index slipped 0.2 per cent to 20,622.68 after the territory’s Monetary Authority matched the Fed’s 0.75 percentage point rate hike with one of its own. The HKMA aligns its policies with US monetary moves to keep the Hong Kong dollar at a stable rate against the US dollar.
Elsewhere in Asia shares advanced, tracking gains on Wall Street after the Fed did exactly as expected and its chair, Jerome Powell, suggested the Fed’s rate hikes have already had some success in slowing the economy and possibly easing inflationary pressures.
“While a concrete decision on tariff relief is not expected from the meeting, any indications of willingness in working toward that is an added positive for markets,” Jun Rong Yeap of IG said in a commentary.
Tokyo’s Nikkei 225 picked up 0.4 per cent to 27,815.48, while the Shanghai Composite index added 0.2 per cent to 3,282.58. In Seoul, the Kospi advanced 0.8 per cent to 2,435.27.
South Korea’s Samsung Electronics Co, the world’s top producer of smartphones and memory chips, reported yesterday that its operating profit rose 12 per cent in the April-June quarter thanks to strong demand for server chips.
Its shares edged 0.2 per cent higher yesterday.
Australia’s S&P/ASX 200 jumped one per cent to 6,889.70 after the government reported that retail sales rose in June for the sixth consecutive month. Also, Treasurer Jim Chalmers told Parliament that the government forecasts that inflation will remain unacceptably high for some time to come and the economy will slow but not fall into recession.
Markets in Thailand were closed for a holiday.
On Wall Street, investors welcomed the Fed’s widely expected move with a broad rally on Wednesday.
Powell’s comments were taken by some as a signal the Fed may not have to raise rates so aggressively in coming months, triggering a rally in the final hour of regular trading.
The S&P 500 climbed 2.6 per cent and the tech-heavy Nasdaq surged 4.1 per cent, its biggest gain in over two years. The Dow Jones Industrial Average rose 1.4 per cent. The Russell 2000 of small caps closed 2.4 per cent higher.
The indexes are now all on pace for a weekly gain, extending Wall Street’s strong July rally.
The S&P 500 is up 6.3 per cent so far this month.
Rate increases like Wednesday’s, the fourth so far this year, make borrowing more expensive and slow the economy. The hope is that the Fed and other central banks can deftly find the middle ground where the economy slows enough to whip inflation but not enough to cause a recession.
In other trading yesterday, US benchmark crude oil added USD1.66 to USD98.92 per barrel in electronic trading on the New York Mercantile Exchange. It gained USD2.28 to USD97.26 on Wednesday.
Brent crude, the international standard for pricing, gained USD1.69 to USD103.36 per barrel.
The US dollar cost JPY135.35, down from JPY136.55. The euro rose to USD1.0204 from USD1.0197.