Post-Fed Trades Fade as U.S. Stocks, Bonds Retreat: Market Wrap
Trades sparked by the Federal Reserve’s dovish tone partially unwound Thursday, as U.S. stocks slumped after the best gain in two weeks and Treasury yields edged higher following an 11-point tumble. The dollar slipped. The S&P 500 Index’s post-Fed rally ran out of steam after the index climbed within 0.5 percent of an all-time high. Health-care shares led declines. Treasuries fell amid steeper declines for U.K. bonds after the Bank of England moved closer to raising rates. The pound advanced. Emerging-market equities surged the most since July on bets American growth will drive demand abroad. European shares rose after the Dutch election eased concerns about the rise of populism. Crude slipped below $49 a barrel.
Euro zone lifted as ECB joins central bank trend
The euro briefly jumped to a five-week high and the bloc’s bond yields and banking stocks climbed on Friday as comments from an ECB policymaker prompted investors to price in a high chance of a rate hike by year end. Asian stocks advanced and were set for their best week since July after most of the world’s biggest economies either tightened monetary policy, or signalled tightening, in a strong sign of confidence about global growth and inflation. Markets are also keeping an eye on the Group of 20 finance leaders’ meeting in Germany this weekend, where topics including reforms to boost economic growth, protectionism and exchange rates are expected to be on the agenda.
China’s money rates up after PBOC raises short-term funding costs
China’s primary money rates rose this week after the central bank bumped up short-term market ones, in what economists said was a bid to stave off capital outflows and keep the yuan currency stable after the Federal Reserve hiked U.S. rates. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered a key indicator of general liquidity in China, was 2.7745 percent on Friday – up around one basis points from the previous day’s closing average rate. For the week, the rate was up around 25 basis points. On Thursday, the People’s Bank of China (PBOC) raised open market operation reverse repurchase agreements by 10 basis points for seven-, 14- and 28-day tenors. The move – the second such one in six weeks – brought the seven-day rate to 2.45 percent.