MUSCAT: Stocks fell in Europe and Asia on Thursday as investor concern over the pace of U.S. economic growth overshadowed a widely telegraphed rise in Federal Reserve interest rates that lifted the dollar off recent lows. U.S. stock futures signalled a rocky start on Wall Street after Wednesday’s rate hike and another tumble in tech stocks.
Euro zone government bond yields rose, reflecting post-Fed moves in U.S. Treasuries, whose yields had earlier fallen after weaker-than-forecast inflation and retail sales data triggered alarm about the underlying health of the U.S. economy.
A Washington Post report that U.S. President Donald Trump was under investigation for possible obstruction of justice added to investor worries and undermined their appetite for riskier assets.
The Fed raised interest rates for the second time this year, by a quarter percentage point to a target range of 1.00-1.25 percent and forecast one more rise in 2017. Policymakers said the economy was strengthening and that they viewed recent softness in inflation as largely transitory. The U.S. central bank also gave a first clear outline of plans to shed its $4.5 trillion bond portfolio built up in three rounds of quantitative easing stimulus. Fed Chair Janet Yellen said this process could begin “relatively soon”.
“They have taken a cautious approach to balance sheet normalisation, but they have begun it and it’s definitely a tightening of policy,” said ING strategist Martin van Vliet.
“The meeting was definitely tilted towards the hawkish side.”
European shares opened lower on Thursday, following falls in major indices in Asia. The pan-European STOXX 600 index dropped 0.5 percent, led lower by the basic resources and oil and gas sectors, as the stronger dollar weighed on metals prices.
Copper fell 0.6 percent to $5,665 a tonne, having earlier hit a one-week low of $5,642, while Shanghai aluminium dropped 1.2 percent to $13,560 a tonne.
