Gold, silver down after US Fed hikes rates

Xavier Trudeau
Juin 16, 2017

TOKYO (AP) - Global stocks fell Thursday after the U.S. Federal Reserve raised its key interest rate and the Bank of England revealed it was unexpectedly close to hiking its own benchmark rate at its policy meeting.

The US Federal Reserve raised interest rates by a notch as expected on Wednesday and indicated further tightening before the end of the year.

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.

Mueller is investigating alleged Russian interference in the 2016 US presidential election and possible collusion with the Trump campaign. Reports emerged Wednesday that investigators last month began seeking to learn whether Trump tried to interfere in the Russian Federation investigation. Scalise was listed in critical condition.

The pan-European FTSEurofirst 300 index ended down 0.3 percent and MSCI's gauge of stocks across the globe fell 0.8 percent.

The Fed has increased its interest rates by a quarter percentage for the second time in a period of three months, in line with market expectations.

USA stocks, which were starting to look immune to the myriad negative headlines surrounding Trump, finally seemed to react to the latest news about the ongoing FBI investigation into Russian meddling in last year's election.

The Fed now faces a delicate balancing act as it attempts to reconcile flagging inflation with positive economic data like the United States unemployment rate, which sits at its lowest in 16 years.

US Treasuries weakened, pushing yields on the benchmark 10-year note almost three basis points higher to 2.160% from 2.138% on Wednesday.

As of 12:41 BST, the FTSE 100 had lost 88.54 points to stand 1.18 percent lower at 7,385.86.

The data had knocked the dollar and US bond yields to its lowest level in seven months against a basket of currencies.

The euro traded at $1.1210, after having hit a seven-month high of $1.1296. The dollar rose to 110.09 from 109.57 yen. US shares looked set to open lower, with Dow futures down 0.4 percent and S&P futures off 0.6 percent. The central bank also said it would shrink its $4.5 trillion balance sheet this year, despite recent data showing that inflation was lagging the Fed's 2% target. The surprisingly weak inflation and other data overshadowed the Fed's rate hike.

Williams predicts a "peak" rate under 2 per cent due to delayed tax cuts, potential protectionism and the lagged effects of previous hikes yet to come through - a process that generally takes 18 months to hit consumer spending in full.

"Stocks have been at all-time highs and valuations are somewhat priced to perfection so a little bit of a pullback is not too surprising", said Myles Clouston, senior director at Nasdaq Advisory Services in NY. Shares of energy companies in the S&P 500 lost 0.7%, while USA crude for July delivery lost 0.6% to $US44.46 a barrel - its lowest settlement since November.

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