Stock market: World shares rise after the Fed increases stimulus and pulls back
Stocks rose in Europe and Asia, tracking Wall Street’s rally, after the Federal Reserve said it would accelerate the withdrawal of economic stimulus measures.
Shares rallied in Paris, Frankfurt, London and Tokyo. Oil prices and New York futures also rose.
The Fed said it will likely raise rates three times next year to tackle rising inflation and will shrink its monthly bond purchases at twice the rate it previously announced, along with ends completely in March.
While the US is accelerating efforts to combat inflation, analysts say central banks in Europe are not expected to follow suit.
Germany’s DAX rose 1.8% on Thursday to 15,751.98 and the CAC 40 in Paris rose 1.5% to 7,032.41. The FTSE 100 rose 1.1% to 7,247.49. Futures on the S&P 500 index were 0.6% higher while contracts for the Dow industrials rose 0.5%.
In Asian trade, Tokyo’s Nikkei 225 gained 2.1% to 29,066.32 and South Korea’s Kospi gained 0.6% to 3,006.41. The Shanghai Composite Index added 0.8% to 3,675.02. India and Taiwan rose, while Sydney’s S&P/ASX 200 lost 0.4% to 7,295.70.
In Hong Kong, Hang Seng recovered from its initial loss, rising 0.2% to 23,475.50.
Analysts say simmering tensions between Beijing and Washington are casting a shadow over, after the US House of Representatives passed a resolution banning imports from China’s Xinjiang region over concerns about forced labor and other abuses.
In addition, the US is said to be considering sanctions that prevent companies from supplying equipment to China’s largest computer chip maker, SMIC.
The company’s Hong Kong-traded shares fell 5% on Thursday. They are down nearly 22% in the past six months.
Some concerns about potentially tougher sanctions from the US have kept investors dodging, with China’s SMIC recently coming under US scrutiny once again, and that seems to be the case. limits the profitability of China’s tech sector today,” IG’s Yeap Jun Rong said in a commentary.
While the US is accelerating efforts to combat inflation, central banks in Europe are not expected to follow suit, analysts said.
“The ECB pigeons cannot budge,” Mizuho Bank said in a market report. “For one, while the economic recovery lingers, it remains fragile, threatened by the ‘Omicron’ variant,” it said.
Germany is in the midst of its worst wave of infections to date. In Asia, Korea is struggling to beat the rising crops.
On Wednesday, the main US stock indexes rose after falling ahead of the release of the Fed statement at 2 p.m. ET. The S&P 500 index rose 1.6% to 4,709.85, nearly making up for all of its losses for the week and ending just below the record high it set last Friday.
The Dow Jones Industrial Average rose 1.1% to 35,927.43 and the tech-heavy Nasdaq composite was up 2.2% to 15,565.58. The Russell 2000 index of smaller companies rose 1.6 percent. Bond yields rose higher.
The US central bank says its monthly bond purchases are no longer necessary with unemployment falling and inflation at a near 40-year high. The accelerated timetable puts the Fed on track to start raising rates as early as the first half of next year.
Central bank policymakers have been expected to announce a faster cut in their last meeting of the year.
Businesses have been facing supply chain issues and higher costs for months. That’s a key concern for investors as big companies pass those costs on to consumers, who have hitherto been saddled with higher prices for everything from groceries to pants. clothing and other consumer products.
Bond investors had a more measured response to the Fed’s announcement. Bond yields edged higher, with yields on 10-year Treasuries rising to 1.45% from 1.44% late Tuesday.
In another session on Thursday, U.S. crude rose 66 cents to $71.53 a barrel in electronic trading on the New York Mercantile Exchange. It rose 14 cents to $70.87 a barrel on Wednesday.
Brent crude, the international basis for pricing, rose 67 cents to $74.55 a barrel.
The US dollar rose to 114.06 Japanese yen from 114.04 yen. The euro rose to $1.1319 from $1.1292.