Home » Money

US Treasury Secretary says market reaction to Fed's rate hike "overblown"

22 December, 2018, 10:26 | Author: Sara Gill
  • Chair of the Federal Reserve Jerome Powell

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.3 per cent, with Australian shares slipping as much as 0.7 per cent to two-year lows.

Amazon, Facebook, Netflix and a handful of other huge technology companies, once the best-performing stocks on the market, are now leading the way lower.

China's benchmark Shanghai Composite and the blue-chip CSI 300 fell 0.8 per cent and 0.9 per cent, respectively, while Hong Kong's Hang Seng was off 0.7 per cent.

The Nasdaq has shed 19.5 per cent from its August peak, just shy of confirming a bear market. And in their latest statement, they gave a nod to recent concerns about a slowdown outside the US and the volatile stock market. Now that the whole market is falling, these former favorites are now taking the worst of the losses.

"If you live by momentum, you die by momentum", said Sam Stovall, chief investment strategist for CFRA.

Markets have suffered wide losses over the last week. "We do expect a very hard year for investors". Some analysts had hoped that recent stock-market turbulence might convince the Fed to halt the program, which, like rate hikes, acts to tighten credit.

The Dow Jones Industrial Average closed at 23,323.66 on Wednesday, the lowest at any point in in 2018, and 12.1 percent lower than October 3 when it closed at an all-time high of 26,951.81.

The Dow Jones Industrial Average swung from a gain of 381 points right before the Fed's decision was announced at 2 p.m.

The Fed has continued to forecast strong growth, which would support their case for tightening monetary policy, but the expected inflation spurt and rise in wages have not materialised.

In Europe, London's benchmark FTSE 100 index slid 0.8% to 6,711.93 points, with losses capped by stronger-than-expected United Kingdom retail sales data.

Fed officials did indicate the pace of rate hikes will slow, with a majority predicting on Wednesday that the central bank would raise rates no more than twice next year.


The Fed's fourth rate increase of the year, which sent Wall Street tumbling, moved the central bank squarely into the crosshairs of the president, who had said earlier a rate hike would be "foolish". "And markets have to react, live, to that "on the one hand, on the other hand" that Powell has to play in this economy".

US markets are cooling after "years of outperformance" and working off "overvaluation in some areas" such as major tech companies, said Shane Oliver of AMP Capital in a report. Media reports say the administration might also pull large numbers of soldiers out of Afghanistan.

The S&P 500 fell 36 points, or 1.4 per cent, to 2,471.

Still, global growth has slowed. Indexes in Italy, Portugal and Spain took bigger losses.

Crude reversed strong gains won a day earlier on concerns about growth and oversupplies of U.S. oil, and tracking equity losses.

USA junk bonds were sold off sharply, with their ETFs falling 0.9 per cent, the biggest decline since March 1. Brent crude, the standard for global oil prices, fell 1.3 percent to $53.67 a barrel in London.

-Wholesale gasoline was little changed at $1.32 a gallon. Wholesale gasoline lost 4.6 percent to $1.32 a gallon and heating oil slid 3.1 percent to $1.75 a gallon. The Italian FTSE MIB jumped 1.6 percent.

Oil prices meanwhile dived to fresh 15-month lows, prolonging volatility that has gripped the crude market in recent weeks.

Benchmark 10-year Treasuries retreated after steep gains on Wednesday.

Silver rose 0.3 percent to $14.87 an ounce and copper, which is considered an indicator of economic growth, fell 0.7 percent to $2.70 a pound. Natural gas lost 2.9 percent to $3.73 per 1,000 cubic feet.

Williams tried to correct the market impression that two interest rate increases are set in stone for next year, highlighting a slight change of language in the policy statement issued Wednesday.

Recommended:



Popular

Nuno Espirito Santo says Wolves showed lack of focus in Liverpool loss
Liverpool move to 48 points, at the top of the Premier League , with this being their sixth consecutive victory in December. Van Dijk was tasked with keeping tabs on Adama Traore , with the Wolves winger renowned for his Olympic sprinter speed.

US House passes sweeping overhaul to criminal justice system
An array of liberal and conservative advocacy groups rallied in support of the bill. The legislation clarifies faith-based organizations may provide training in prison.

Alec Baldwin Claims Trump Is 'Punishment' for America's Sins
This " It's a Wonderful Life " themed sketch on Saturday Night Live imagines a White House without President Donald Trump . Trump's attacks on the media, whether news or entertainment, have at times come with legal threats.

How Facebook Shared Data With Partners Without You Knowing
Microsoft had a similar deal for Bing, where it could " see the names of virtually all Facebook users' friends without consent". Senator Brian Schatz said the latest revelations highlight a need for tougher controls on how tech companies handle user data.

'We have defeated ISIS in Syria': U.S. plans to withdraw troops
Trump tweeted on Wednesday: " We have defeated Isis in Syria , my only reason for being there during the Trump Presidency". Defense Secretary Jim Mattis and other senior U.S. officials had advocated to help ensure Islamic State can not reemerge.

IPL auction: Chakravarthy, Unadkat emerge most expensive buys at Rs 8.40 crore
However, he came back in the final round and Mumbai Indians snapped him up at his base price of Rs 1 crore. KXIP also spent big on England all-rounder Sam Curran, buying him for Rs 7.2 crore.

Canelo Alvarez looking make history vs. Rocky Fielding
It's no coincidence, perhaps, that Canelo's first DAZN fight will happen a week after HBO's exit from boxing last Saturday. Fielding (27-2, 15 KOs) beat the count and the bell once more, but the end was near.

Eight Is Great: Patrick Peterson Named To Another Pro Bowl
Kelce, selected to his fourth consecutive Pro Bowl, has at least one catch in 77 straight games dating back to Week 1 of 2014. Peterson tied Hall of Fame safety Larry Wilson for the most Pro Bowl selections in team history among defensive players.

Mitchell Starc's epic celebration after incredible first-over wicket
Australia was then dismissed for 243 when swing bowler Mohammed Shami claimed a career-best 6-56. "You guys are the captains". The series, level at 1-1 following Australia's victory in Perth , continues at the MCG on Boxing Day.

Support pours in for Tamaryn Green post Miss Universe
Her natural and glowy look definitely complemented her Ibong Adarna gown . Apparently, it's the same with her hair and makeup too.