US stocks fell with the dollar and Treasuries as investors speculated the Federal Reserve will err in favour of more accommodation as it assesses the path for future rate hikes. Crude slipped below $49 a barrel. The S&P 500 Index failed to add to its best advance in two weeks, with health-care shares leading declines. 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. The British pound strengthened after the Bank of England left its interest rate unchanged.
The Fed raised its benchmark lending rate a quarter point without accelerating the timetable for future hikes. Chair Janet Yellen said in a press conference that the “simple message is the economy is doing well.” Investors anticipated the tightening and Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of tightening. Those trades unwound late Wednesday as policy makers indicated they haven’t fallen behind with efforts to keep inflation in check.
“There was some uncertainty that they might signal that they feel behind the curve, and the answer was not,” Isabelle Mateos Y Lago, global macro strategist at BlackRock Investment Institute in Paris, said in an interview with Bloomberg TV’s Matt Millar. “Central banks are on a reasonably predictable path on both sides of the Atlantic now.” Just hours after the Fed’s decision, the BOJ left its plans unchanged, increasing the policy divergence between the two central banks.
China’s central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the US. The Swiss National Bank kept its deposit rate at an historic low and reaffirmed its threat to intervene to keep a lid on the franc. Turkey’s central bank raised a key interest rate to rein in inflation.
US President Donald Trump unveiled a fiscal 2018 budget request. He is proposing historically deep cuts that would touch almost every federal agency and program and dramatically reorder government priorities to boost defense and security spending. US Secretary of State Rex Tillerson travels to Japan, South Korea and China in his first visit to the region since taking office.
The S&P 500 slipped 0.3 percent to 2,379.10 at 11:49 a.m. in New York, after the benchmark gauge added 0.8 percent on Wednesday. Health shares slid 1.3 percent with energy shares falling 0.5 percent. The Stoxx Europe 600 Index climbed 0.6 percent.
Sterling erased an earlier decline to trade 0.6 percent higher at $1.2361. The pound and Swiss franc were the only Group-of-10 currencies trading higher versus the greenback. The Bloomberg Dollar Spot Index lost 0.2 percent after its 1.3 percent post-FOMC drop. The euro dropped by 0.2 percent to $1.0718, after touching a five-week high at $1.0746; it gained 1.2 percent on Wednesday.
The yield on 10-year Treasuries rose three basis points to 2.52%. French 10-year yields dropped as much as six basis points before erasing gains and rising six basis points. Spanish and Italian 10-year bond yields rose five basis points, while the yield on the German benchmark bund added four basis points.
West Texas Intermediate climbed 0.8 percent to $49.27 a barrel and Brent gained 0.9 percent to $52.25. Industrial and precious metals rose. Silver increased 1 percent to $17.52 an ounce, outstripping gold’s 0.9 percent gain. Copper added 1.4%.
The MSCI Asia Pacific Index climbed to the highest since mid-2015. Hong Kong’s Hang Seng and the Hang Seng China Enterprises Index jumped more than 2 percent, the most since May, as China followed the Fed in raising rates. Japan’s Topix reversed an early loss after the Bank of Japan kept monetary policy unchanged. The MSCI Emerging Markets Index jumped the most since July, with benchmarks in Indonesia and Malaysia soaring more than 1.2 percent.