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Fed hawkishness meets peace deal relief

The Federal Reserve (Fed) kept interest rates unchanged on Wednesday but struck a more hawkish tone, unsettling Wall Street as investors digested signs that US policymakers now see scope for higher rates rather than cuts. US stocks closed lower after the decision, while European equities finished mostly higher and Asian markets were trading mixed on Thursday, with Japanese and South Korean shares hitting record highs as a US-Iran framework agreement eased geopolitical tensions. Falling oil prices added to the improved mood in Asia, while the US Dollar Index and US Treasury yields shot up following the Fed decision. Attention now turns to the Swiss National Bank and Bank of England interest rate decisions on Thursday.

  • Data
  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

US Federal Reserve
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The Federal Reserve kept its benchmark interest rate unchanged at 3.5%-3.75% on Wednesday, while updated projections suggested policymakers now see at least one rate increase this year, compared with an earlier view in March that implied one cut. Federal Reserve Chair Kevin Warsh also shortened the policy statement and removed language that had pointed to possible easing, saying he wants to review how the central bank communicates its outlook. Officials raised their 2026 inflation forecasts to 3.6% for headline inflation and 3.3% for core inflation, up from 2.7% for both in March, while trimming their growth outlook and citing supply shocks, including higher energy prices linked to the Middle East conflict.

US stocks fall after Fed

US stocks closed lower on Wednesday after the Federal Reserve signalled that interest rates could rise, even as it kept its policy rate unchanged, amid concerns over inflation linked to the Iran war. The Dow Jones Industrial Average fell 1%, after touching a record high earlier in the session, while the S&P 500 dropped 1.2% and the Nasdaq 100 lost 1%. Investors were unsettled after the Fed raised its inflation outlook for this year and markets began to price in a possible rate increase in October, while semiconductor shares including AMD, Intel and Micron recovered from the previous day’s losses. SpaceX shares fell 5%, marking their first decline since last week’s record initial public offering, as investors weighed the stock’s sharp post-listing gains and limited free float.

Asia stocks rise on peace deal

Most Asian stock markets advanced on Thursday after the US and Iran signed a framework agreement aimed at ending their conflict, lifting risk appetite and pushing Japan’s Nikkei 225 up 1.8% to a record and South Korea’s KOSPI up 2.2% to an all-time high as well. Australia’s S&P/ASX 200 was trading 0.5% lower, while mainland China’s CSI 300 was 0.3% higher. Hong Kong lagged, with the Hang Seng falling 2% to an 11-month low as internet stocks declined and concerns grew over Beijing’s restrictions on mainland investment flows into the city. Lower oil prices also supported sentiment, with Brent crude oil and West Texas Intermediate (WTI) trading around USD 77.83 and USD 74.88 per barrel, respectively.

Euro-area inflation rises in May

Euro-area annual inflation accelerated to 3.2% in May from 3% in April and 1.9% a year earlier, according to Eurostat data released on Wednesday. Inflation across the EU increased to 3.3% from 3.2% in April, compared with 2.2% in May 2025, while monthly price growth was 0.1% in both the euro area and the EU. Services and energy made the largest contributions to euro-area inflation, adding 1.6 and 1 percentage point respectively, as services inflation rose to 3.5% and energy inflation remained elevated at 10.8%. European stock indices were mostly higher on Wednesday: The Euro Stoxx 50 rose 0.8%, while Germany’s DAX added 0.1% and the Swiss Market Index gained 0.4%.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Accenture.

Economic data in focus: UK unemployment rate (08:00), Swiss trade balance (08:00), SECO Swiss economic forecast (09:00), Swiss National Bank interest rate decision (09:30), Bank of England interest rate decision (13:00), Philly Fed Manufacturing Index (14:30), US weekly initial jobless claims (14:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.