The dollar advanced across the market due to a hawkish message from the Federal Reserve
U.S. stocks dropped overnight after the Federal Reserve raised its inflation expectations and moved up the time frame on when it will next hike interest rates. The S&P 500 fell 0.54%, the Dow Jones Industrial Average lost 0.77%, and the Nasdaq Composite shed 0.24%. In the bond market, the yield on the 10-year Treasury climbed to 1.55% from 1.50%.
Asian stock markets followed Wall Street lower Thursday after the Federal Reserve indicated it might ease off economic stimulus earlier than previously thought. The U.S. monetary-policy makers, who previously forecast no interest rate hikes before 2024, estimated their benchmark rate would be raised twice by late 2023. The Fed also indicated it sees the U.S. economy improving faster than expected. The Nikkei 225 in Tokyo lost 0.93%, Hong Kong’s Hang Seng was off less than 0.1%, the Shanghai Composite Index was up 0.08%, the Kospi in Seoul sank 0.36%, and Australia’s S&P-ASX 200 gained 1.4%.
European equities declined on Thursday after Federal Reserve officials were more hawkish than expected. The Stoxx 600 Index was down 0.3% in early trade while banks gained amid rising bond yields.
In currencies, the dollar advanced across the market due to a hawkish message from the Federal Reserve. EURUSD plunged below the 1.2000 figure, extending losses to two-month lows around 1.1935 in recent trading as traders continued to digest the outcome of the FOMC meeting.
Meanwhile, oil prices extended the rally to the $75 area earlier on Wednesday before retreating under $54 as risk sentiment deteriorated following the Fed’s meeting while the dollar rallied across the board. On the positive side, the Energy Information Administration said on Wednesday that crude oil inventories fell 7.355 million barrels last week, compared with analysts’ expectations for a draw of 3.29 million barrels. Distillate stockpiles fell 1.023 million barrels in the week against expectations for a build of 186,000 barrels. Brent crude regained upside momentum on Thursday despite the persisting strength in the greenback.