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Global stocks mixed as markets adjusts to Fed's policy pivot

·3-min read
The dollar rallied against most currencies after the Federal Reserve brought forward expectations for its first interest rate hike

Global stocks were mixed on Thursday as traders digested the Federal Reserve's move to bring forward its forecasts for hiking interest rates as the economy recovers.

The dollar meanwhile continued to rally against most major currencies as foreign exchange investors adjusted bets after the central bank's announcement.

"The biggest takeaway was that the Fed was less confident that higher inflation would prove temporary," said a note from Joe Manimbo, senior market analyst at Western Union Business Solutions.

"Consequently, the Fed has climbed the ranks among the world's more hawkish central banks, putting the focus on yields, whose rise buoys the dollar."

The Fed on Wednesday maintained highly accommodative monetary policy as expected, but a majority of central bank officials now believe interest rates will increase in 2023, rather than 2024. Several policymakers projected interest rate hikes as soon as 2022.

A day later, Wall Street equity investors gravitated towards technology giants and shunned financial and energy shares, reversing a trend that has held for most of 2021.

"The good news is money is not rotating out of the market, it's just rotating into growth stocks," said Art Hogan, chief strategist at National Securities.

Shares of Apple, Facebook and Amazon all climbed more than one percent, leading to a 0.9 percent jump in the tech-rich Nasdaq Composite Index to 14,161.35.

But both the Dow and S&P 500 finished lower.

After a mixed Asian session, European stocks spent much of the day down, but Paris and Frankfurt managed to the end the day with gains.

London, however, closed down 0.4 percent.

While many markets have hit record or multi-year highs in recent months, traders have been worried that the era of record low borrowing costs could be nearing an end, and fearful of an abrupt shift in direction by central banks.

"Uncertainty remains regarding if the Fed can manage its policy effectively amid festering inflation pressures and an accelerating economic recovery," said analysts at Charles Schwab brokerage.

The greenback's rise weighed on dollar-priced oil, with both main contracts retreating from recent multi-year highs.

- Key figures at 2100 GMT -

New York - Dow: DOWN 0.6 percent at 33,823.45 (close)

New York - S&P 500: DOWN less than 0.1 percent at 4,221.86 (close)

New York - Nasdaq: UP 0.9 percent at 14,161.35 (close)

London - FTSE 100: DOWN 0.4 percent at 7,153.43 (close)

Frankfurt - DAX 30: UP 0.1 percent at 15,727.67 (close)

Paris - CAC 40: UP 0.2 percent at 6,666.26 (close)

EURO STOXX 50: UP 0.2 percent at 4,158.14 (close)

Tokyo - Nikkei 225: DOWN 0.9 percent at 29,018.33 (close)

Hong Kong - Hang Seng Index: UP 0.4 percent at 28,558.59 (close)

Shanghai - Composite: UP 0.2 percent at 3,525.60 (close)

Euro/dollar: DOWN at $1.1912 from $1.1995 at 2100 GMT

Pound/dollar: DOWN at $1.3922 from $1.3988

Euro/pound: DOWN at 85.54 pence from 85.76 pence

Dollar/yen: DOWN at 110.18 yen from 110.71 yen

Brent North Sea crude: DOWN 1.8 percent at $73.08 per barrel

West Texas Intermediate: DOWN 1.5 percent at $71.04 per barrel

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