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Global stocks continued a steady descent from record highs reached earlier in the week and the dollar strengthened after the US central bank brought forward the anticipated timing of its first post-pandemic interest rate rise.

The FTSE All-World index of developed and emerging market stocks, which hit a closing record on Monday, headed for its third session of small losses on Thursday morning in London, dropping 0.5 per cent.

The Stoxx Europe 600 index, which rallied to an all-time high on Wednesday, fell 0.3 per cent in early trading the following session. Shares in European banks, which benefit from higher interest rates that enable lenders to make wider profit margins, opened 1.1 per cent higher.

Following its latest monthly meeting, the Federal Reserve said on Wednesday evening that most officials expected a rate rise in 2023, up from a previous projection of 2024.

The announcement has not roiled markets because “of an expectation that this will be happening at a time when the [global] economy is able to stand on its feet,” said Zehrid Osmani, manager of Martin Currie’s global portfolio trust.

Economists project US gross domestic product will grow about 10 per cent this year in a strong post-pandemic rebound for the world’s largest economy. US consumer price inflation hit 5 per cent in the 12 months to May.

“If there was not any expectation by the central bank of a rate rise in the next two years, there would actually be more to worry about,” Osmani said. “We could be at risk of overheating or inflation getting out of control.”

The dollar index, which measures the greenback against trading partners’ currencies, jumped 0.6 per cent after gaining a similar amount on Wednesday as traders anticipated higher returns from holding the world’s reserve currency. The euro lost 0.3 per cent against the dollar to $1.1964.

US Treasuries, which weakened sharply after the Fed’s announcement because higher interest rates on cash weaken the appeal of fixed interest securities such as government bonds, steadied on Thursday. The yield on the benchmark 10-year US Treasury, which moves inversely to its price, was unmoved at 1.562 per cent.

The Federal Open Market Committee on Wednesday also kept its bond purchasing programme, introduced last year to cushion the economic blow from Covid-19, unchanged at $120bn per month. Powell said the process of winding down the programme would be “orderly, methodical and transparent”, adding that any changes would be signalled “well in advance”.

“We don’t think that tapering the programme will create tangible stress to the economy or markets,” said Rick Rieder, chief investment officer of global fixed income at BlackRock. “The biggest risk today would be an overheating paradigm where it’s hard to predict how high input, or wage, costs could get.”

Expectations of tighter monetary conditions also weighed on oil prices, with Brent crude, the international benchmark, down 0.7 per cent at $73.86 a barrel. US marker West Texas Intermediate fell by the same degree to $71.86 a barrel.