Fed rate hike draws mixed response from global markets
The much anticipated 0.25% increase in the Fed funds rate came to fruition overnight as Chairwoman, Janet Yellen reaffirmed her expectations of an inflation rate of 2% by 2018. While developments of late tend to suggest this may be off the mark, Yellen said that recent declines are coming from areas such as telecommunications.
However, other data emerged overnight which indicates inflation could struggle to get to 2% with May retail sales below expectations.
The Dow negotiated last night’s news in reasonable fashion, increasing 0.2% to 21,374 points, an all-time record close.
However, tech stocks continued to place a drag on the NASDAQ as it fell 0.4% to close at 6194 points.
Similar dynamics drove European markets with the FTSE 100 falling 0.4% to 7474 points, also dragged down by weakness in oil prices.
Mainland European markets were mixed with the DAX up 0.3% to 12,805 points, while the Paris CAC 40 fell 0.3% to 5243 points.
On the commodities front, oil was the main focus as it plunged nearly 4% to US$44.68 per barrel.
Gold came off 0.5% to close at US$1262 per ounce.
Iron ore gained 2% to US$54.43 per tonne.
Most base metals rebounded from the previous day’s falls except for copper which came off nearly 1% to close at US$2.55 per pound.
Nickel was the best performer, rallying 1.7% to close at US$4.03 per pound.
There was also good support for zinc and lead with both metals up more than 1%.
Lead’s close of US$0.94 per pound represented a gain of 1.3%.
Zinc gained 1.6% to close at US$1.12 per pound.
After rallying strongly on the back of the Fed rate decision to more than US$0.76, the Australian dollar settled just below that mark towards the end of trading.
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