Global shares slip, dollar gains as Fed sticks to agenda of near-zero rates

The S&P 500 and Nasdaq ended a choppy session lower as losses in heavyweight technology names such as Amazon.com and Apple weighed on the market and drove down MSCI’s US-centric benchmark index for stock performance around the world.  — AFP pic
The S&P 500 and Nasdaq ended a choppy session lower as losses in heavyweight technology names such as Amazon.com and Apple weighed on the market and drove down MSCI’s US-centric benchmark index for stock performance around the world. — AFP pic

NEW YORK, Sept 17 — Global equities slid and the dollar firmed yesterday after the Federal Reserve pledged to hold interest rates near zero until at least 2023 and keep its bond-buying programme in place to stimulate the US economy as part of a dovish policy stance.

The S&P 500 and Nasdaq ended a choppy session lower as losses in heavyweight technology names such as Amazon.com and Apple weighed on the market and drove down MSCI’s US-centric benchmark index for stock performance around the world.

Longer-term US Treasury yields and gold prices edged higher after the Fed promised to keep rates on hold until inflation is on track to “moderately exceed” the US central bank’s 2 per cent inflation target “for some time.”

“They want to be dovish. They want to be super dovish. The market is priced for dovish,” said Nancy Davis, managing partner and chief investment officer at Quadratic Capital Management LLC in Greenwich, Connecticut.

“Nobody thinks there’s going to be any kind of inflation at all and the guidance is more dovish and in line with what the market expected,” Davis said, adding that she believes there is a danger inflation could exceed expectations.

New economic projections released with the Fed’s policy statement showed rates on hold through at least 2023, with inflation never breaching 2 per cent over that time. Policymakers saw the economy shrinking 3.7 per cent this year, far less steep than the 6.5 per cent decline forecast in June. Unemployment, which registered 8.4 per cent in August, was seen falling to 7.6 per cent by the end of the year.

Last month, the US central bank adopted a new approach to inflation and unemployment that will allow the economy to run a little hotter than in the past to help ensure job growth for lower-income earners.

Phil Orlando, chief equity strategist at Federated Investors in New York, said short-covering or some other hedging may have forced stocks lower at day’s end, and the market could easily bounce back by tomorrow.

“The market has this weird response mechanism around Fed meetings all the time, regardless of who the chairman is,” he said. “I watched the press conference, I watched the Q&A; I thought what (Fed Chair Jerome Powell) said was fine.”

MSCI’s benchmark for global equity markets fell 0.17 per cent to 574.65, while its emerging markets index rose 0.38 per cent.

On Wall Street, the S&P 500 lost 15.71 points, or 0.46 per cent, to 3,385.49 and the Nasdaq Composite dropped 139.86 points, or 1.25 per cent, to 11,050.47. The Dow Jones Industrial Average closed up 36.78 points, or 0.13 per cent, to 28,032.38.

In Europe, the broad FTSEurofirst 300 index closed up 0.49 per cent at 1,446.16. London’s FTSE 100 lagged gains by other European indices, down 0.44 per cent at the close, but the struggling pound was propped up by a weaker dollar.

European retail stocks surged on strong results from Zara-owner Inditex after it said there was a progressive return to normality, with online sales growing sharply and store sales recovering. Shares of the Spanish retailer jumped 8.1 per cent.

US consumer spending slowed in August, with retail sales excluding automobiles, gasoline, building materials and food services sliding 0.1 per cent after a downwardly revised 0.9 per cent increase in July.

Retail sales lost a little steam in August, but consumers overall are still doing well despite modest weakness relative to expectations, said Russell Price, chief economist at Ameriprise Financial in Troy, Michigan.

When the pandemic slowed economic growth, consumers were in a relatively strong financial condition, the direct opposite of what is normally the case for an economic downturn, he said.

“Consumers are still overall doing well despite the modest weakness relative to expectations,” Price said.

The yen rose overnight and extended gains that hit a nearly seven-week high of 104.995 to the dollar as investors sought safer assets.

The dollar index rose 0.052 per cent, with the euro down 0.36 per cent to US$1.1802 (RM4.87).

The Japanese yen strengthened 0.41 per cent versus the greenback at 104.97 per dollar.

The 10-year US Treasury note rose 1.8 basis points to 0.6969 per cent after trading lower for much of the session.

US gold futures settled up 0.2 per cent at US$1,970.50 an ounce. Spot gold prices rose 0.10 per cent to US$1,957.47 an ounce.

Oil prices rose for a second day, up more than 2 per cent, as Hurricane Sally closed US offshore production and an industry report showed US crude inventories unexpectedly decreased.

Brent crude futures rose US$1.69 to settle at US$42.22 a barrel, while US crude futures settled up US$1.88 at US$40.16 a barrel.

Zinc prices pushed toward 16-month highs hit earlier this month as resurgent Chinese industry bolstered the outlook for demand and the yuan strengthened, making metals more affordable for Chinese buyers. — Reuters

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