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Stocks mixed after Fed rate rise

The Federal Reserve’s first interest-rate increase since 2023 prompted a mixed reaction across markets on Wednesday, as policymakers signalled that inflation concerns could require further tightening. European equities closed higher, but Wall Street ended mostly lower, while Asian trading was mixed on Thursday, with Chinese shares under particular pressure. Oil prices fell sharply midweek as concerns over Middle Eastern supply disruptions eased, while attention now turns to the Bank of England’s policy decision this afternoon.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

Building of the Federal Reserve
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The Federal Reserve raised its target interest-rate range by 0.25 percentage points to 3.75-4.00% on Wednesday, marking its first tightening since July 2023. Federal Reserve Chair Kevin Warsh said resilient economic growth, insufficiently restrictive financial conditions and stubborn inflation had driven the unanimous decision, while policymakers projected at least one further increase this year. The Fed’s preferred inflation measure rose 3.7% year-on-year in August, remaining above its 2% target for 65 consecutive months, as higher oil prices threaten to add further price pressures. US Treasury yields shot up after the Fed decision, with the ten-year yield above 5% and the two-year yield above 4.7%. The US Dollar Index increased to 100.28 points.

Asian stocks mixed, China falls

Asian equities were mixed on Thursday following the Fed decision, with Japan’s Nikkei 225 gaining 0.1% and South Korea’s Kospi slipping 0.1%, while Hong Kong’s Hang Seng fell 1.1% and mainland China’s CSI 300 declined 0.3%. Australia’s S&P/ASX 200 gained 0.3%. Brent crude traded around USD 105.38 per barrel after dropping as much as 5% on Wednesday, as Saudi Arabia said it aimed to restore about half the capacity of its East-West pipeline within days following last week’s drone attacks.

US stocks decline after Fed rate rise

US equities ended mixed on Wednesday after the Fed rate hike. The Dow Jones Industrial Average fell 1.2% to 51,461.90 points and the S&P 500 lost 0.5% to 7551.81 points, while the Nasdaq 100 was essentially unchanged at 28,945.06 points. Fed Chair Warsh indicated that another increase could follow before year-end, reinforcing concerns that higher borrowing costs may weigh on risk assets. Semiconductor shares outperformed amid expectations that artificial-intelligence safety requirements could lift computing demand. In macroeconomic data, US retail sales rose 1.2% in August, reversing a 0.5% decline in July and exceeding market expectations.

Euro-area industrial production dips

Industrial production in the eurozone edged down 0.1% in July, matching the decline in June, while EU output fell 0.3%, Eurostat reported on Wednesday. Gains in energy, capital goods and durable consumer goods were outweighed by a 1.6% drop in non-durable consumer goods production. European stock indices had closed higher on Wednesday, with the Euro Stoxx 50 up 0.6%, Germany’s DAX gaining 0.5%, France’s CAC 40 rising 0.6% and the Swiss Market Index adding 0.4%.

UK inflation rises on fuel costs

UK annual inflation accelerated to 3.1% in August from 2.9% in July, driven largely by a 23% year-on-year rise in motor fuel costs, data showed on Wednesday. Petrol prices reached their highest level since November 2022 as the Iran war’s energy shock kept crude oil above USD 100 a barrel, while household energy costs increased 6% from a year earlier. Food and non-alcoholic beverage inflation eased to 1.1%, suggesting the energy shock has not yet spread widely through the inflation basket. The market's focus is now on the Bank of England's monetary policy decision at 1pm (CET). 

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: SECO Swiss economic forecast (09:00), euro-area Consumer Price Index (11:00), Bundesbank monthly report (12:00), Bank of England interest rate decision (13:00), Philly Fed Manufacturing Index (14:30), US weekly initial jobless claims (14:30), US building permits (14:30).

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Editor: Alessandro Fezzi
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