World stock markets slip after Fed hints at rate hike in December

TOKYO – Global stock markets mostly fell on Thursday after Federal Reserve policymakers left the U.S. benchmark rate at a record low but indicated they might raise it at their December meeting if the U.S. economy keeps improving.

KEEPING SCORE: Britain’s FTSE lost 0.9 per cent to 6,381.23 and France’s CAC 40 shed 0.6 per cent to 4,861.38. Germany’s DAX was down 0.2 per cent at 10,812.77. Wall Street looked set for a weak start. Dow and S&P 500 futures were down 0.4 per cent.

FEDERAL RESERVE: In its latest statement, the Fed deleted language expressing concern about the global economy, which led to renewed expectations in financial markets of a December rate hike. Fed Chair Janet Yellen has previously said she wants to start raising rates this year. The Fed cut its benchmark interest rate to almost zero in late 2008 to stimulate the economy during the Great Recession. Low interest rates have been a boon for stock markets for several years.

JAPAN DATA: Stronger than expected Japanese manufacturing data failed to boost sentiment, since it increases the likelihood the Bank of Japan will hold off on further monetary easing. The BOJ wraps up a policy meeting on Friday.

THE QUOTE: “The hawkish Fed statement and strong Japanese industrial production data put in doubt any further expansion of monetary easing by the major central banks in the near term,” Angus Nicholson of IG said in a research note.

EARNINGS: European corporate earnings reports were mixed, with Deutsche Bank announcing a big $6.6 billion loss and 35,000 job cuts through redundancies and business divestments. Royal Dutch Shell booked a third quarter loss of $7.4 billion while oil company saw its profit fall to $1.1 billion. More upbeat reports came from Nokia, whose shares rose 9 per cent after it raised its forecast, and German airline Lufthansa.

ASIA’S DAY: Hong Kong’s Hang Seng shed 0.6 per cent to 22,819.94 and Australia’s S&P/ASX 200 dropped 1.3 per cent to 5,266.90. South Korea’s Kospi slipped 0.4 per cent to 2,034.16 while Japan’s Nikkei 225 eked out a 0.2 per cent gain after wavering all day to close at 18,935.71. China’s Shanghai Composite Index rose 0.4 per cent to 3,387.32. Shares in Southeast Asia were lower.

CURRENCIES: The dollar slipped to 120.94 yen from 121.07 yen in the previous trading session. The euro rose to $1.0974 from $1.0924. The dollar had climbed against other currencies on Wednesday as traders anticipated that higher rates were on the way. Central banks in Europe and Japan are expected to continue their own stimulus programs, keeping their rates near zero.

ENERGY: Oil prices fell back after soaring the day before. U.S. crude slipped 60 cents to $45.34 in electronic trading on the New York Mercantile Exchange. It climbed $2.74 to $45.94 a barrel in New York on Wednesday.


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