Stocks notch up new high but it's all about the Fed

Marcus Newton
September 23, 2017

The announcement was widely anticipated and showed the Fed's confidence in the country's economic growth, according to The New York Times. It has also trimmed its inflation forecast. GDP in the first quarter was revised to 0.6 percent from 0.5 percent. The Philippine and Taiwanese central banks also make rates decisions later in the day.

The kiwi jumped half a United States cent after the 1News Colmar Brunton poll yesterday showed the National Party leapfrogged its rival Labour Party, with 46 percent support to 37 percent. The Fed, though, has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate.

Nike fell 1.62 percent, pulling the Dow down the most, after a slew of price target cuts by brokerages on concerns about intensifying competition from Adidas. Markets are also waiting for any hints of a rate hike in December. Iyt will start shrinking its balance sheet by unwinding ay $10bn a month, it said. Wellington slipped 0.3 percent but Taipei was up 0.6 percent.

Yet even though the $10 billion a month in maturing debt that the Fed initially plans to let run off from its balance sheet amounts to a mere trickle, the bond market may still throw another fit - a sequel to the 2013 taper tantrum, when then-Federal Reserve Chairman Ben Bernanke signaled that the Fed was likely to slow its asset purchases later in the year.

Fed officials cautioned that the devastation of Hurricanes Harvey, Irma and Maria would hold back the US economy in the "near term".

Investors focused on Fed's policy statement and projections due to be released at 2 p.m. ET (1800 GMT).

"It doesn't get any more brazenly hawkish from Dr Yellen, who along with the majority of her colleagues are clearly in the December rate hike camp and the markets are reacting to this news", said Stephen Innes, head of Asia-Pacific trading at OANDA.

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The Federal Reserve is leaving interest rates alone to give the economy room to keep growing. The long-run fed funds rate is now expected to be 2.75 percent instead of 3.00 percent.

Technology companies were among the biggest decliners. The benchmark Shanghai Composite index rose 9.15 points or 0.3% to 3,366 while Hong Kong's Hang Seng index was up 76 points or 0.3% at 28,127 in late trade.

"We would really urge consumers to be very careful in monitoring their credit reports and financial situation", said Yellen at a press conference following a two-day Federal Open Market Committee meeting.

The ultra-loose monetary policy - which began as a calculated response to the shock of the global financial crisis in 2008 - has helped suppress bond yields and boost equity prices to record highs.

The Fed has telegraphed its move for months, and investors are thought to be prepared for it. The panel was expected to deliver an update on the Fed's view of the economy Wednesday.

The cause of the spike in the Dollars was arguably the fact that the dot plot or perceived course of hikes from the Fed continued to expect one hike this year and three next year.

USA bond yields rose, pushing up the US dollar after the Fed's decision, but US benchmark stock indexes were little changed.

Other reports by MaliBehiribAe

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