The US Federal Reserve moderated the pace of rate hikes from 75 basis points to 50 basis points, raising the target range for the federal funds rate to a 15-year high of 4.25%-4.5%. The US central bank also projected at least an additional 75 basis points of rate hikes by the end of 2023.

In US economic data, export prices dipped 0.3% in November (survey: -0.5%). Import prices fell by 0.6% in November (survey: – 0.5%). MBA mortgage applications rose by 3.2% last week. European sharemarkets were subdued on Wednesday as investors treaded cautiously ahead of the US Federal Reserve’s rate decision. Real estate shares rose by 1.2% but mining stocks slid 1.7%. The continent-wide FTSEurofirst 300 index was flat and the UK FTSE 100 index dipped 0.1%. The annual rate of UK consumer price inflation dropped to 10.7% in November from a
41-year high of 11.1% in October (survey: 10.9%).

US sharemarkets fell on Wednesday, paring gains following a policy announcement by the US Federal Reserve that raised interest rates by an expected 50 basis points, but its economic projections see higher interest rates for a longer period. Stocks came off session lows after US Federal Reserve Chair Jerome Powell suggested the central bank is getting “close” to reaching the end of its policy tightening cycle. At the close of trade, the Dow Jones index fell by 142 points or 0.4% after climbing 287 points earlier in the session. The S&P 500 index shed 0.6% and the Nasdaq index slid 86 points or 0.8%.

US government bonds were firmer (yields lower) in choppy trading on Wednesday after the US Federal Reserve raised interest rates by 50 basis points, and struck a hawkish tone in its statement, suggesting rates will remain higher next year though at a slower pace. US 10-year Treasury yields fell by around 2 points to near 3.48%. And US 2-year Treasury yields dipped by around 1 point to near 4.22%.

Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.0617 to highs near US$1.0693 and was near US$1.0680 at the US close. The Aussie dollar jumped from lows near US68.10 cents to highs near US68.80 cents and was near US68.60 cents at the US close. But the Japanese yen weakened from near 134.67 yen per US dollar to JPY135.96 and was near JPY135.35 at the US close.


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Global oil prices jumped 2.5% on Wednesday after the International Energy Agency (IEA) raised its 2023 oil demand
growth estimate to 1.7 million barrels per day (bpd) for a total of 101.6 million bpd. US crude oil stockpiles rose by 10.231 million barrels last week, the most since March 2021 (survey: -3.595 million). The Brent crude oil price rose by US$2.02 or 2.5% to US$82.70 a barrel. And the US Nymex crude oil price gained US$1.89 or 2.5% to US$77.28 a barrel.

Base metal prices were mixed on Wednesday. Aluminium prices fell by 1.1% on concerns about surging Covid-19 cases in top metals consumer China. Copper prices rose by 0.5%.

The gold futures price fell by US$6.80 an ounce or 0.4% to US$1,818.70 an ounce. Spot gold was trading near US$1,807 an ounce at the US close. Iron ore futures rose US3 cents a tonne or less than 0.1% to US$109.26 a tonne.

Ahead: In Australia, labour force, population and wealth data are all released. Chinese retail sales, industrial production and fixed asset investment figures are all due. In the US, data on retail sales, manufacturing, inventories and industrial production all feature. The European Central Bank, Bank of England and Swiss National Bank announce policy decisions.

Originally published by CommSec