Global stocks hold gains after Fed decision, oil prices rise
Global stocks and Wall Street indexes rose after the Fed held rates at 3.75%-4%, while oil prices climbed on renewed Middle East supply concerns.
Global stocks and major Wall Street indexes gained on Wednesday after the Federal Reserve held interest rates steady, as expected, and oil prices rose on renewed concerns over supply disruptions. In a 10-2 decision, the US central bank said it would maintain its benchmark interest rate within the current 3.75%-4.00% range. The Fed upgraded its assessment of the economy while acknowledging inflation "remains elevated."
After the release, Fed Chair Kevin Warsh told reporters the central bank has made clear its willingness and readiness to act. US Treasury yields gave up gains briefly after Warsh's comments. Spot gold prices advanced in choppy trade. MSCI's gauge of stocks across the globe rose 4.29 points, or 0.38%, to 1,134.03. On Wall Street, the Dow Jones Industrial Average .DJI rose 97.53 points, or 0.19%, to 52,475.10, the S&P 500 .SPX gained 21.37 points, or 0.28%, to 7,743.97 and the Nasdaq Composite .IXIC gained 72.04 points, or 0.27%, to 26,549.85.
The pan-European STOXX 600 index rose 0.07%. MORE EXPECTED FROM CENTRAL BANKS The Fed's decision "reflects the continued balancing act between inflation concerns and an economy and employment situation that have remained relatively resilient," said Charlie Wise, head of global research at TransUnion in Chicago. Earlier, market moves had been mostly modest ahead of the Fed decision, outside Asia. New Zealand's central bank surprised investors by leaving interest rates on hold, contrary to expectations for a hike, while the Bank of Canada raised rates for the first time in three years.
The European Central Bank and Bank of Japan are expected to issue policy decisions this week as well. Traders' attention will also turn to Thursday's US Personal Consumption Expenditures data, which could offer further insight into the trajectory of monetary policy. Financial markets are pricing in an 85.0% likelihood of a 25-basis-point rate hike at the Fed's December meeting, up from 78.3% on Tuesday, according to CME's FedWatch tool.
"While the September dot plot suggests just one more hike, another increase in energy prices or further strong data prints could bring additional tightening into play next year," said Kay Haigh, head of fixed income and liquidity solutions at Goldman Sachs Asset Management in New York. AI RALLY'S LATEST TEST Technology giants Alphabet and Microsoft reported earnings after the close. Microsoft shares slightly extended gains after beating quarterly cloud revenue estimates.
Meanwhile, Alphabet's heavy spending drove a bigger-than-expected cash burn, sending shares lower after the bell. A series of AI-related funding announcements from Meta, SpaceX and Broadcom this week has once again tested the market's willingness to pay for further building, though Anthropic's filing for an initial public offering showed results that many investors regarded as stronger than expected, providing support.
CENTRAL BANKS IN THE SPOTLIGHT Earlier on Wednesday, the Reserve Bank of New Zealand surprised investors by keeping interest rates at 2.75% in a narrow vote, sending the kiwi down 1%. "Today's decision shows the RBNZ is willing to surprise markets, a reminder that central banks do not take orders from markets," Carol Kong, a currency strategist at Commonwealth Bank of Australia, said. In the UK, finance minister John Healey delivered a cautious first budget, one that prioritised stability in the bond market over the kind of big spending moves that Andy Burnham talked about when he became prime minister.
Britain's stocks, bonds and currency barely reacted to the statement, in which he pledged to stick to fiscal rules, while accepting a smaller fiscal cushion due to rising energy prices and borrowing costs. The pound reversed earlier losses and was last up 0.17%. Election results in Israel showed Prime Minister Benjamin Netanyahu's right-wing bloc performing more strongly than expected, but still falling short of a parliamentary majority.
In commodities, oil prices rose after an attack on a refinery in Saudi Arabia, the world's biggest crude exporter, renewed concerns around the risks to supply in the Middle East. Brent futures added 1% to finish at $115.32 per barrel, while US crude rose 3% to settle at $102.78. US gold futures for December delivery settled 0.6% lower at $4,051.60 per ounce. Spot gold was up 0.27% at $4,070.28 an ounce.
