Stocks Drop; Euro Falls on Italy Budget Worries: Markets Wrap
Stocks in Asia fell Thursday as investors took in the likelihood of further Federal Reserve interest-rate increases stretching into next year. The euro fell on a report that Italy may postpone a meeting on its 2019 budget plan.
Japanese stocks led declines along with shares in Hong Kong and China after a muted start to the trading day in the aftermath of the Feds rate decision. European equity futures suggested a weaker open to European trading. U.S. 10-year yields held declines and the greenback rose as the Feds statement provided fodder for differing viewpoints.
The euro dropped -- and Italian stocks will be in focus -- after the newspaper Corriere della Sera reported that Italys cabinet may not meet Thursday to decide on 2019 budget targets, due to new complications in reaching agreement on the deficit.
The S&P 500 Index closed lower, with the bulk of losses coming in the final 20 minutes of trading. U.S. equities had earlier gained after the central bank suggested inflation remained tepid, only to reverse as Chairman Jerome Powell said the Fed could raise rates past the perceived neutral level.
The Feds statement handed ammunition to hawks and doves alike as investors parsed the language for clues on monetary policy. After most U.S. markets closed, President Donald Trump said he was not happy about the rate increase. Next up are two key Asian central bank policy decisions, in Indonesia and the Philippines. Both may raise rates, the former to deal with a balance of payments crisis and the latter in response to surging inflation.
The market forecast a 99 percent probability of a 25 basis points hike and there has therefore not been a significant reaction to the Feds announcement today, said Larry Hatheway, chief economist at GAM Investments. Investors must be mindful that at some point the Fed will inevitably become more ambiguous in its forward guidance, making, in our view, the trajectory for U.S. rates progressively more difficult to read.
Elsewhere, crude erased earlier losses after U.S. Energy Secretary Rick Perry said the nations strategic oil reserves wont be tapped to expand global supplies.
Here are some key events coming up this week:
Thursday sees durable goods, GDP data and jobless claims for the U.S. Policy decisions are due in the Philippines and Indonesia.
And these are the main moves in markets: Stocks
Japans Topix index fell 1.2 percent at the 3 p.m. close in Tokyo. Australias S&P/ASX 200 Index lost 0.2 percent. Hong Kongs Hang Seng Index fell 0.4 percent. Shanghai Composite Index lost 0.7 percent. S&P 500 futures were little changed. The S&P 500 Index fell 0.3 percent. FTSE 100 Index futures fell 0.3 percent as of 7 a.m. in London.
The yen rose 0.1 percent to 112.64 per dollar. The offshore yuan traded at 6.8734 per dollar. The Bloomberg Dollar Spot Index rose 0.3 percent. The euro fell 0.3 percent to $1.1705.
The yield on 10-year Treasuries was steady at 3.04 percent after falling four basis points. Australias 10-year bond yield declined four basis points to 2.69 percent.
West Texas Intermediate crude gained 1.2 percent to $72.43 a barrel. Gold rose 0.3 percent to $1,198.21 an ounce.
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