Global shares drift as investors pause ahead of Fed

Posted Сентября 21, 2017

In Australia, the S&P/ASX 200 was recently down 0.7%; some mining companies fell more than 1% as a stronger US dollar depressed metal prices.

The majority of Fed policymakers signaled on Wednesday that they expect to lift rates one more time this year. The Fed wrapped up a two-day meeting of top USA economic policymakers on Wednesday, Sept. 20, 2017.

Apart from currency moves, yields on short-term and longer-term U.S. Treasuries also rose Wednesday following the Fed's statement.

"On the release of the FOMC, the NZD spiked to a high of 0.7433 and the AUD spiked to 0.8102, but both currencies have since plunged, as the FOMC statement supported the Dollars, with a more hawkish outlook than some expected", Bank of New Zealand currency strategist Jason Wong said in a note.

While some investors said the Fed's tone was more hawkish than expected others were happy Fed Chair Janet Yellen reiterated her stance that balance sheet reduction would be data dependent. "The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate", Federal Reserve stated in last meet on 25-26 July 2017.

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According to the Fed's economic projections released on Wednesday, Fed officials expected the USA economy to grow 2.4 percent this year, higher than their forecast of 2.2 percent in June. The Fed will reduce its balance sheet by ten billion dollars a month initially, gradually upping the pace after each quarter, until it reaches 50 billion dollars every month promising to move cautiously, so as to avoid unsettling the markets.

"Job gains have remained solid in recent months, and the unemployment rate has stayed low", the Fed said in a statement. Higher rates in turn boosts the value of the dollar, which has an inverse correlation to the gold price.

While the Federal Reserve did not raise its benchmark interest rate, several officials hinted at a possible hike somewhere in the near future. Benchmark 10-year notes fell 11/32 in price to yield 2.29 percent, up from 2.24 percent before the Fed's statement and the highest level since August 8.

The Dow is up 2,649.99 points, or 13.4 percent. The 2-year Treasury note's yield TMUBMUSD02Y, -1.15% was down by 1.6 basis point to 1.385%, versus 1.401%, while the 30-year bond yield TMUBMUSD30Y, -0.15% was virtually unchanged at 2.807%.

"They just have to be very careful because it's a highly levered US economy".

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