Australian stocks saw noted declines, along with some others in Asia Pacific, leaving the S&P/ASX 200 at another two-year closing low and financials at mid 2013 levels. The benchmark fell 1.3% to 5505.8 as energy slid 1.8% and materials lost 3% amid ongoing sharp drops in prices of a number of commodities. Helping limit the ASX’s declines were roughly 1% gains for REITs and utilities as yield hungry investors moved in amid fresh declines in global bond yields. And financials declined 1.1%, putting the index’s largest component on a closing basis at levels last seen in June 2013.
U.S. stocks tumbled intraday, with the Nasdaq Composite Index teetering on the edge of a bear market, as the Federal Reserve’s latest guidance on interest rates spooked investors in growth-sensitive assets like technology shares. Highflying stocks like Netflix, Amazon.com and Apple that have benefited from years of easy money and low rates came under fresh pressure, all declining about 2%. Easy monetary policies and massive bond-buying from the world’s biggest central banks have been credited with fueling the yearslong rally in global stocks and dampening volatility. This year has been different, however. Stocks have tumbled around the world, fueled by trade tensions between the U.S. and China and a slowdown in growth. Technology stocks, in particular, have been battered in the fourth quarter on signs on slowing revenue growth. The tech heavy Nasdaq declined 1.3% to 6548, off nearly 20% from its Aug. 29 high. The index would be the first of the major three U.S. stock benchmarks to end a bull-market run that kicked off in wake of the financial crisis in March 2009, if it closes at or below 6487.75. The Dow Jones Industrial Average dropped 418 points, or 1.8%, after earlier falling as much as 679 points, while the S&P 500 fell 1.3%. The indexes are trading at their lowest levels since fall 2017.
Gold climbed to its highest settlement in almost six months, marking a recovery from the after-hours decline for the precious metal that followed an expected Federal Reserve rate increase. Gold for February delivery on Comex rose $11.50, or 0.9%, to settle at $1,267.90 an ounce – the highest for a most-active contract since June 25, according to FactSet data. Prices have gained about 3.4% month-to-date. Gold had held its early gain after a mixed batch of economic releases early in the day. The Fed said it decided to hike its target for the federal-funds rate by a quarter point to a range between 2.25% and 2.5%. The central bank also said, however, that it has now penciled in two rate hikes in 2019, not the three moves seen in September, and it still forecasts just one more hike for 2020. In other commodity markets, March wheat prices rose 1 cent to $5.23 1/2 cents.
Iron Ore: 69.48 + 0.83 (January Contract)
Oil prices settled at a 17-month low, as higher interest rates ignited fresh concerns about slowing global demand. Light, sweet crude for February delivery fell 4.8% to $45.88 a barrel on the New York Mercantile Exchange, closing at the lowest level since July 2017. Brent, the global benchmark, settled down 5% at $54.35.The Federal Reserve raised interest rates on Wednesday, which weighed on riskier assets like stocks and commodities. Meanwhile, fears of slowing global growth and declining fuel consumption have added to weakness in the crude market.
The dollar fell intraday as traders anticipated a slowdown in interest-rate increases by the Federal Reserve and continued weakness in riskier U.S. assets. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.5% at 90.11. The move came after the dollar initially climbed Wednesday after the Fed raised its benchmark federal-funds rate for the fourth time this year and signaled it would likely continuing raising rates in 2019. Rising interest rates tend to boost the dollar by making the U.S. currency more appealing to yield-seeking investors. Still, the Fed also suggested that the pace of interest-rate increases would likely slow next year. Stocks and other riskier U.S. assets also fell sharply after the Fed’s decision, an indication that factors that have supported the dollar this year – rising rates and the relative appeal of U.S. assets to global investors – could be losing some of their prominence.
The Stoxx Europe 600 index closed 1.5% lower at 336.58, its lowest close in more than two years, as global equity sentiment took a hit after the Federal Reserve raised interest rates on Wednesday. Traders are worried the Fed will press ahead with monetary tightening plans even as the economy softens, said David Madden at CMC Markets. A sharp fall in Airbus shares also weighed on the pan-European share index. Airbus lost 4.4% after a report that the U.S. Department of Justice has opened a probe into corruption at the plane maker. Weak earnings also caused shares in cruise operator Carnival to drop 11%. Germany’s DAX fell 1.4%, France’s CAC 40 by 1.8% and the U.K.’s FTSE 100 by 0.8%, all reaching two-year lows. Italy’s FTSE MIB slid 1.9% and Spain’s Ibex 35 by 2%.
Asian equities were largely unable to escape the end-of-day selling in the U.S., which occurred in the wake of the Fed’s predictions about 2019. Many indexes’ declines were largely centered between 0.5% and 1%, but Japan’s Nikkei sunk 2.8% to 15-month lows as risk-off sentiment boosted the yen. That environment also continued to pressure commodities prices. The index in Shenzhen was among the only ones to finish higher. The impact of the Fed’s policy statement rippled across Asia, where the Japanese Nikkei 225 dropped to a 15-month low. Some technology-focused blue chips dropped more than the broader market, with SoftBank Group and Panasonic both down more than 4.7%. Losses elsewhere were more contained, as Chinese, Taiwanese and Hong Kong benchmarks fell by about 1%.