Home News Fed’s decision to raise interest rates sank the world markets

Fed’s decision to raise interest rates sank the world markets

Fed's decision to raise interest rates sank the world markets, spreading from Wall Street through Asia to Europe.

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The US Federal Reserve’s decision to raise interest rates sank the world markets. The red wave dragged Wall Street stocks down, with Dow Jones Industrial Average decreasing by more than 350 points.

On Wednesday, the US central bankers decided to raise interest rates by a quarter percentage point to the range of 2.25-2.50%, arguing their decision with the tight labour market and healthy economic growth. The Fed believes that the risks to the economy are fairly balanced by committing itself to continue to monitor the development of the global economy and to assess the economic outlook.

Investors were disappointed as the central bank’s tone was not as dovish as some had hoped.

Asian markets recap

The Asian exchanges ended today with decreases following the US Federal Reserve’s decision to raise benchmark interest rates for the fourth time this year.

The Japanese blue-chip index Nikkei 225 wiped out 595.34 points, or 2.84%, ending the session at 20,392.58 points. The shares of the SoftBank corporation declined again by 4.72%, just one day after the disappointing IPO of the company’s mobile unit.

On Chinese exchanges, the continental index Shanghai Composite reported a decline of 0.52% to 2,536.27 points. Hong Kong’s benchmark Hang Seng fell by 249.54 points, or 0.96%, to 25,615.85 points. People’s Bank of China decided to keep short-term interest rates on credit stable, just a day after announcing that it would take measures to boost loans to small companies. Against this background, the Industrial and Commercial Bank of China and Agricultural Bank of China declined by 1.88% and 0.57%, respectively.

In South Korea, the local index Kospi fell by 0.90% to 2,060.12 points. The stock price of LG Electronics dropped by 4.13% after NH Investment and Securities reported a 15% decline of the company’s operating earnings for the fourth quarter, pointing to the weak performance of TV and smartphone production units.

Kospi index trade

In Australia, the index S&P ASX 200 fell by 1.34% to 5,505.80 points, while shares of Australia and New Zealand Banking Group and National Australia Bank declined by 1.63% and 0.99%, respectively. Similar is the case with Commonwealth Bank of Australia and Westpac, where their stock prices dropped by 0.69% and 1.07% respectively.

The investors’ focus was also on the serious decline in the value of Asian microprocessor manufacturers shares. SK Hynix and Taiwan Semiconductors Manufacturing Co declined by 2.82% and 2% respectively. Tokyo Electron shares fell 4.3%, while the value of Advantest’s shares fell by 3.91%. The reason for the negative results for the companies in question is the 8% decrease in shares of American Micron Technology.

European markets mid-session recap

The red wave spread to German stocks, which fell sharply on Thursday. DAX 30 was down by 112 points, or 1.04%, to 10,654.27 points at 10:30 GMT with selling seen across the board. The benchmark index fell nearly 2% earlier in the day to hit its lowest level since late 2016.

French stocks succumbed to heavy selling pressure on Thursday. The benchmark CAC 40 wiped out 1.44% of its value to 4,708.55 points at mid-session. The stocks of Bourbon slumped by 5.3% on news it is searching for new financial partners to ensure its development and the implementation of a strategic plan. Publicis Groupe dropped by 1.4% after the company said it is entering into exclusive negotiations with the founding shareholders of Soft Computing, data marketing firm in France, to acquire a controlling block representing 82.99% of the share capital at a price of 25 EUR per share. The stocks of Capgemini lost 2.3% after announcing share capital reduction. The automaker Renault declined by 1.7% even as a Tokyo court rejected a request from prosecutors to extend the detention of Nissan Motor Co’s ousted chairman, Carlos Ghosn.

The British FTSE 100 has fallen to its lowest level since August 2016 this morning as a market selloff sparked by the Fed’s decision to raise interest rates spread to the UK. During the trading, the stocks recovered slightly and at mid-session, the FTSE 100 is moving with a decrease of 0.5% to 6,731.99 points.

FTSE 100

Wall Street pre-session recap

U.S. futures fell on Thursday morning after the Federal Reserve defied pressure from President Donald Trump and raised benchmark interest rates.

At around 05:30 a.m. ET, Dow Jones Industrial Average futures imply a decline of more than 25 points at the opening bell. Meanwhile, S&P 500 and Nasdaq futures also pointed to declines at the open.

The investors are likely to closely monitor Philly Fed manufacturing figures for December at around 8:30 a.m. ET, with the latest jobless claims data scheduled for publication at the same time.

In corporate news, Accenture, Walgreens Boots Alliance and Carnival are among the major companies expected to release their latest quarterly earnings before the opening bell. Nike and Cintas are both scheduled to publish their latest results shortly after Thursday’s trading sessions ends.