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The Federal Reserve’s decision to stop raising interest rates has had mixed effects on global markets and currencies. Some investors are optimistic that lower rates will boost growth and earnings, while others are worried that inflation and debt will rise.
- Stocks: World stock markets have been volatile as they adjust to the Fed’s pause. Some markets have risen on hopes of lower borrowing costs and higher profits, while others have fallen on fears of slower growth and trade tensions. The S&P 500 and Nasdaq have extended their winning streaks, while the Nikkei and Hang Seng have declined.
- Bonds: U.S. Treasury yields have mostly fallen as investors expect the Fed to keep rates steady or even cut them in the future. The yield on the 10-year note has dropped below 5%, a level some see as a new bottom. The yield on the two-year note, which reflects rate expectations, has risen slightly to 4.938%.
- Dollar: The dollar has weakened against most major currencies as the Fed’s pause reduces its appeal. The dollar index, which measures the greenback against a basket of currencies, has fallen 0.01% to 105.51. The euro has risen 0.07% to $1.0707. The majority of FX strategists expect the dollar to remain weak for the rest of the year.
- Oil: Oil prices have slid to more than three-month lows on concerns over weakening demand from the U.S. and China, the world’s two largest oil consumers. Brent crude futures have settled down $2.07 at $79.54 a barrel and U.S. crude has lost $2.04 to settle at $75.33.
- Gold: Gold prices have retreated for a third straight session as yields on short-term Treasuries have risen and on longer-dated notes have fallen. U.S. gold futures have settled 0.8% lower at $1,957.80 an ounce.
The Fed’s pause has created uncertainty and opportunities for investors around the world. The Fed’s next move will depend on how the U.S. economy and inflation perform in the coming months. The Fed chair Jerome Powell did not comment on monetary policy or the economic outlook in his latest speech. Investors are looking forward to his meeting with President Xi Jinping later this month, which could have implications for global trade and growth.
Source: Reuters
