Global shares fall, US Treasury yields rise after dovish Fed minutes


In their July meeting minutes released on Wednesday, Fed officials said the pace of future rate hikes would depend on incoming economic data, as well as assessments of how the economy was adapting to the higher rates already approved.After the release of the minutes, traders of futures tied to the Fed's policy rate saw a half-percentage-point rate hike as more likely in September given recent economic data showing a moderation in inflation. U.S. consumer prices were flat while producer prices fell in July.

NEW YORK: Global equities fell and U.S. Treasury yields rose on Wednesday after the Federal Reserve's meeting minutes showed that officials were ready to slow the pace of interest rate hikes in tandem with signals of a slowdown in inflation.

In their July meeting minutes released on Wednesday, Fed officials said the pace of future rate hikes would depend on incoming economic data, as well as assessments of how the economy was adapting to the higher rates already approved.

After the release of the minutes, traders of futures tied to the Fed's policy rate saw a half-percentage-point rate hike as more likely in September given recent economic data showing a moderation in inflation. U.S. consumer prices were flat while producer prices fell in July.

"Overall, the minutes read a bit dovish," said Sean Bandazian, senior investment analyst for Cornerstone Wealth in Charlotte, North Carolina.

"There was a lot of language about slowdowns in different areas but also several mentions about how strong the labor market is. They are keenly aware that there are several areas of the economy that are slowing. Let's remember that these minutes are a bit stale - they are from a meeting that was prior to the decelerated CPI and an extraordinarily strong jobs report that came in for July."

MSCI's gauge of stocks in 50 countries across the globe .MIWD00000PUS shed 0.62%. In Europe, stocks .STOXX closed down nearly 1%, breaking a five-day winning streak after data showed U.K. inflation exceeded 10%.

U.S. Treasury yields advanced on lingering inflation concerns even as some investors saw minutes of the U.S. Federal Reserve's July meeting as officials' taking a less aggressive stance on inflation.

Benchmark 10-year yields US10YT=RR dipped about two basis points after the minutes were released while two-year note yields US2YT=RR fell by about five basis points from 3.335% to 3.285%. Still, they closed higher, at 2.894% and 3.293%, respectively.

"The report read dovish and in the post minutes, yields have fallen, risk assets and equities moved higher and a lot of that comes from a bit of repricing in the September odds for a 50 basis point hike versus 75 basis point hike. It's now skewed to the markets believing there'd be a 50 basis point hike," Bandazian added.

On Wall Street, major indexes sharply cut their losses after the release of the minutes although stocks still closed down driven by a selloff in equities in technology, consumer discretionary, industrials and communication services.

The Dow Jones Industrial Average .DJI fell 0.5% to 33,980.32, the S&P 500 .SPX lost 0.72% to 4,274.04 and the Nasdaq Composite .IXIC dropped 1.25% to 12,938.12.

Oil edged 1% higher after earlier hitting a six-month low on Wednesday, as a steeper-than-expected draw down in U.S. crude stocks outweighed concerns over rising output, Russian exports and recession fears.

Brent crude LCOc1 was up 1.35% at $93.59, up a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 rose 1.71% to $88.01 per barrel.

The U.S. dollar pared its gains following the Fed's meeting minutes. The dollar index =USD rose 0.141%, with the euro EUR= up 0.08% to $1.0178.

Gold prices rebounded but were still lower. Spot gold XAU= dropped 0.8% to $1,760.88 an ounce, while U.S. gold futures GCc1 fell 0.30% to $1,767.80 an ounce.- Reuters

Article type: free
User access status:
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

markets , stocks , Dow , Nasdaq , S&P 500 , oil , gold , oil , Ukraine , Russia , Fed , rate

   

Next In Business News

Wall Street opens lower on rate-hike, recession fears
LTKM signs agreements to dispose of six subsidiaries for RM158.8mil
Microlink wins RM48.55mil contract from Koperasi Co-opbank Pertama
Favelle Favco’s subsidiaries receive contracts totalling RM130.8mil
Sapura Energy 2Q net loss narrows to RM2.59mil
Ringgit falls to new 24-year low as it touches 4.60 to US dollar
Paramount sells remaining education ops for RM120mil
Astro 2Q net profit rises 13% to RM98mil
CFM, Energy Absolute form JV to distribute EV products in Malaysia
Two directors of Pertama Digital resign

Others Also Read