Global markets wobbled on Thursday as US stocks fluctuated after the Federal Reserve postponed cutting interest rates.
US shares were poised for a rise, with futures for the S&P 500 surging 0.5% and for the Dow Jones Industrial Average 0.4% higher. European markets opened mixed ahead of a busy day for corporate earnings. London's FTSE 100 gained 0.4% to 8,155.28 in early trading.
Germany's DAX edged less than 0.1% lower to 17,925.06, while the CAC 40 in Paris lost 0.7% to 7,926.97. Tokyo's Nikkei 225 index dipped 0.1% to close at 38,236.07. The Japanese yen jumped as much as 2% in early Asia hours on Thursday, driven by speculation of another round of yen-buying intervention by Japanese authorities and a weakening US dollar following the Fed meeting. The yen later reversed its gains, erasing its previous surge. The dollar was trading at 155.44 yen, up from 154.91 yen.
“As expected, Japan’s Ministry of Finance, via the Bank of Japan, was back selling U.S. dollars to stabilize the yen. Indeed, the Japanese government is digging into their sizable 1.2 trillion USD war chest, looking to take profit on the dollar they bought back in 2000," Stephen Innes, managing partner at SPI Asset Management, said in a commentary. He said the hope was to stabilize the yen at around 155-157 to the dollar.
In South Korea, the Kospi dipped slightly by 0.3% to 2,683.65 following the release of official data indicating a 2.9% year-on-year rise in consumer prices for April, marking a deceleration from March's figures. Over in Hong Kong, the Hang Seng index surged by 2.4% to reach 18,187.56, while trading in other Chinese markets was paused for the Labor Day holiday.
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Down Under, Australia's benchmark S&P/ASX 200 edged up by 0.2% closing at 7,587.00. Stateside on Wednesday, the S&P 500 saw a slight decline of 0.3% to 5,018.39 after the Federal Reserve maintained its main interest rate at the highest level since 2001, aligning with market predictions. The index had earlier rallied by as much as 1.2% in the afternoon but relinquished those gains by the close of trading.
The Dow Jones Industrial Average bucked the trend with a modest increase of 0.2% to 37,903.29, whereas the Nasdaq composite shed 0.3%, finishing at 15,605.48. Investors were rattled as Federal Reserve Chair Jerome Powell voiced the concern that has been dragging stock prices down and dashing hopes for imminent rate cuts: "In recent months, inflation has shown a lack of further progress toward our 2% objective."
He also suggested that it might take "longer than previously expected" before the Fed could confidently reduce rates, which would alleviate some of the pressure on the economy and investment prices. However, Mr Powell did offer some reassurance by dispelling the notion that persistently high inflation might necessitate further rate hikes. "I think it's unlikely that the next policy rate move will be a hike," he stated.
The Fed has also offered some relief to financial markets by announcing a slowdown in the reduction of its Treasury holdings. This move could lubricate the financial system's trading mechanisms, providing stability in the bond market.
Traders had already reduced their expectations for rate cuts this year to one or two, if any, after starting the year with predictions of six or more. Mr Powell had previously suggested that rates might remain high for some time. This was a letdown for Wall Street, as the Fed had earlier indicated it was planning three rate cuts during 2024.
In energy trading, benchmark US crude halted a three-day decline and rose 58 cents to $79.58 a barrel. Brent crude, the international standard, increased by 69 cents to $84.13 a barrel. In currency trading, the euro was valued at $1.0713, up from $1.0709.
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