The US Federal Reserve lifted the federal funds target by 75 basis points (three-quarters of a per cent) to a 3.75-4.00 per cent range. The Fed noted “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
In US economic data, the ADP employment report indicated that 239,000 private-sector jobs were created in October (survey: 195,000). Mortgage applications fell by 0.5% in the past week after falling 1.7% in the prior week.
European sharemarkets fell on Wednesday as traders squared positions ahead of the Fed rate decision. Healthcare rose 1.2% but personal & household goods fell by 1.6%, technology fell 1.3% and miners lost 1.8%. Shares in Danish shipping group Maersk slid 5.8% as it warned of slowing demand for transport and logistics and cut its forecast for container demand this year. The continent-wide FTSEurofirst 300 index fell 0.3% from 6-week highs. And the UK
FTSE 100 index lost 0.6%.
US sharemarkets were volatile on Wednesday after the Fed chair Jerome Powell said there was still ground to cover before the central bank reached a level of interest rates that would achieve the goal of reducing inflation to target levels. The Dow Jones index traded in a 932 point range before ending lower by 505 points or 1.6%. The S&P 500 index fell by 2.5% and the Nasdaq index fell by 366 points or 3.4%.
US treasuries were weaker on Wednesday (yields higher). The US Fed chair indicated that the central bank will decide at the next meeting or the one after whether to scale back rate hikes. US 10-year yields rose 3 points to near 4.08%. And US 2-year yields rose by around 6 points to 4.60%.
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Major currencies were volatile against the US dollar in European and US trade. The Euro rose from near US$0.9860 to US$0.9975 but was lower near US$0.9825 at the US close. The Aussie dollar rose from near US64.00 cents to highs near US64.90 cents but was lower near US63.55 cents at the US close. The Japanese yen rose from 147.70 yen per US dollar to JPY145.75 but was lower near JPY147.80 at US close.
Global oil prices rose by as much as 1.8% on Wednesday in response to lower US oil inventories. US crude oil stocks fell about 3.1 million barrels last week, according to federal data. Inventories of gasoline fell, while distillate stocks rose only marginally ahead of the key heating season, when demand is expected to pick up. The Brent crude oil price rose by US$1.51 or 1.6% to US$96.16 a barrel. And the US Nymex crude oil price rose by US$1.63 or 1.8% to US$90.00 a barrel.
Base metal prices were mixed on Wednesday. Nickel rose 2.3% but copper lost 0.7% and zinc lost 0.2%.
The gold futures price rose by US30 cents an ounce or less than 0.1% to US$1,650 an ounce. Spot gold was trading near US$1,636 an ounce at the US close. Iron ore futures rose by US$2.07 or 2.6% to US$82.10.
Originally published by CommSec