April 26, 2018

Global shares fall on Fed rate hike, UK rate outlook

19 June 2017, 02:44 | Kenneth Drake

US Federal Reserve raises interest rates by quarter percentage point

Federal Reserve Raises Key Interest Rate

People walk near an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, June 15, 2017, in Tokyo.

The top tier fell 48.6 points to 7425.8, a fall of 0.6%, as markets digested the latest rate rise by the US Federal Reserve, which marked the third in six months. Japan's benchmark slipped as the yen gained against the dollar.

The latest Fed rate hike, announced in a statement after a policy meeting, comes as the US economy is growing only sluggishly.

Greek Finance Minister Euclid Tsakalotos said he was optimistic euro zone lenders would reach an agreement on Thursday on the disbursement of new loans to Athens that the country needs to pay back maturing debt in July.

KEEPING SCORE: Germany's DAX fell 0.6 percent to 12,727.14 while the CAC40 of France sank 0.8 percent to 5,202.60. It fell $1.73, or 3.7 percent, to settle at $44.73 a barrel in NY.

That's despite a rough patch for the USA economy.

An agreement on debt relief is a pre-requisite for the International Monetary Fund to participate in a deal for Greece, which in turn would pave the way for the European Central Bank to involve Greek government debt in its asset purchase scheme.

However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed's policy-setting Federal Open Market Committee, which repeated its confidence that the economy will continue to expand "at a moderate pace" even with further gradual rate increases. As far as interest rates are concerned, the median forecast was for one further rate increase by the end of 2017. You can think of this rate increase as the Fed's seal of approval on the economy's progress. Stock and bond prices weakened after the Fed's moves as some investors anxious that the actions would throttle back economic growth.

The policymakers of Federal Reserve have been grappling with when and how to alter the policies put in place to boost the economic activity after the financial crises in the year 2008. That spurred selling of real estate developers' shares.

KEEPING SCORE: Japan's Nikkei 225 stock index fell 0.4 percent to 19,797.46 and South Korea's Kospi sank 0.6 percent to 2,358.34.

Lower-rated Italian and Spanish government bond yields - which tend to be most sensitive to any changes or tweaks on monetary policy - were up 6-8 basis points. These make up the Federal Reserve's so-called dual mandate, which Congress laid out and obligates the central bank to strive to maintain maximum employment and stable consumer prices. Benchmark U.S. crude fell another 5 cents to $44.68 a barrel in electronic trading on the New York Mercantile Exchange. It fell $1.73, or 3.7 percent, to settle at $44.73 a barrel in NY. Brent crude, used to price worldwide oils, rebounded, gaining 6 cents higher to $47.06 a barrel.

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