The US Federal Reserve lifted the federal funds rate by 25 basis points, the smallest hike since March 2022, to a range of 4.50%- 4.75%, the highest level since October 2007. In the US, ADP payroll employment rose by 106,000 in January (survey: +180,000). JOLTS job openings rose from 10.44 million to a 5-month high of 11.01 million in December (survey: 10.3m). The ISM manufacturing index eased from 48.4 to 47.4 in January (survey: 48), the lowest level since May 2020. Construction spending fell 0.4% in December (survey: flat).
European sharemarkets edged lower on Wednesday ahead of the US Federal Reserve’s monetary policy decision. Autos stocks led gains, up 1.3%. Healthcare stocks, meanwhile, slipped 1.2% to lead losses. Annual consumer prices in the euro zone fell to 8.5% in January from 9.2% in December (survey: 8.9%). The continent-wide FTSEurofirst 300 and the UK FTSE 100 indexes both fell 0.1%.
US sharemarkets rebounded during Wednesday’s trading session after US Federal Reserve Chair Jerome Powell said the “disinflation process has started” in his press conference. The tech-heavy Nasdaq index was boosted by gains in chipmakers after strong Advanced Micro Devices earnings. The semiconductor company’s shares rose 12.6%. Shares of fitness equipment company Peloton surged 26.5% after it narrowed its net losses from a year earlier. At the close of trade, the Dow Jones index rose 7 points or less than 0.1% after being down more than 500 points at session lows. The S&P 500 index gained 1.1% and the Nasdaq index added 232 points or 2%.
US government bonds were stronger on Wednesday (yields lower) after the US central bank raised interest rates as expected by 25 basis points and promised “ongoing” increases in borrowing costs as it keeps tightening monetary policy to slow the pace of inflation. US 10-year treasury yields fell 11 points to 3.42%. And US 2-year treasury yields dipped 10 points to 4.11%.
Major currencies were stronger against the US dollar in European and US trade. The Euro lifted from lows near US$1.0863 to highs near US$1.0996 and was near US$1.0980 at the US close. The Aussie dollar lifted from lows near US70.49 cents to highs near US71.43 cents and was near US71.30 at the US close. And the Japanese yen rose from near 130.39 yen per US dollar to around JPY128.56 and was near JPY129.00 at the US close.
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Global oil prices dived 3.1% on Wednesday after US government data showed that US crude inventories climbed 4.1 million barrels last week to 452.7 million barrels, the highest level since June 2021. Ministers from OPEC+ kept their output policy unchanged. The Brent crude oil price fell by US$2.62 or 3.1% to US$82.84 a barrel. And the US Nymex crude oil price slid US$2.46 or 3.1% to US$76.41 a barrel.
Base metal prices fell on Wednesday. The copper futures price slid 2.8% on concerns about demand in China. The aluminium futures price fell 1.2% as traders weighed the return of Chinese demand and the prospect of increased European supply.
The gold futures price fell US$2.50 or 0.1% to US$1,942.80 an ounce. Spot gold was trading near US$1,951 an ounce at the US close. Iron ore futures rose US$2.96 or 2.4% to a 7-month high of US$126.33 a tonne after Vale’s production miss stoked supply concerns.
Ahead: In Australia, building approvals data is issued. In the US, data on factory orders, labour costs, productivity and jobless claims are all due with Challenger’s job cuts report. The ECB and Bank of England both announce rate decisions. Alphabet, Amazon.com and Apple are expected to report earnings.
Originally published by CommSec