Australian Market

Australia’s S&P/ASX 200 advanced 0.7%, with every sector gaining after data showed U.S. inflation slowed in November. Commodity and tech stocks were among the big winners.

US Market 

U.S. stocks fell after the Federal Reserve raised interest rates, as expected, but also signaled rates may have to move even higher than previously thought to rein in inflation. The S&P 500 fell 0.6% after trading higher during the early part of the day, while the tech-heavy Nasdaq Composite Index dropped 0.8%. The Dow Jones Industrial Average moved 0.4% lower. Investors who had been hoping the Fed might be done raising rates relatively soon may have been left disappointed.

Fed officials signaled they see interest rates rising to around 5.1% by the end of next year, up from previous estimates in September of around 4.6%. Officials also said they see unemployment rising and economic growth being tepid in “We’re not out of the woods yet,” said Viraj Patel, global macro strategist at Vanda Research. “We’re still in a higher-than-normal inflation environment.”

Commodities

Gold futures ended lower, then fell even further after the Federal Reserve announced a 0.5 percentage point increase to its benchmark interest rate. Gold futures for February delivery fell 0.4%, to settle at $1,818.70 an ounce on Comex. “The Fed announcement will be followed by the latest rate decisions from the Bank of England and the European Central Bank with both of them forced to raise rates, even if this increases the risk of recession in both regions,” said Carlo Alberto De Casa, external market analyst at Kinesis Money. “Any dovish comment coming from policy makers could give new fuel to gold’s recovery. Vice versa, hawkish rhetoric could determine a consolidation phase or some moderate correction, even if the main trend still appears positive,” he said.

Oil Futures

Oil futures settled higher, buoyed after the International Energy Agency raised its forecast for demand growth in the year ahead, as traders digested news of a significant weekly rise in U.S. crude supplies and the Fed’s decision on interest rates. News of a more than 10 million-barrel weekly climb in U.S. crude inventories failed to pull down prices, as analysts attributed the hefty increase to a temporary export disruption in the U.S. Gulf Coast.

West Texas Intermediate crude for January delivery rose 2.5% to settle at $77.28 a barrel on the New York Mercantile Exchange, the highest front-month finish since Dec. 2, according to Dow Jones Market Data. February Brent crude was up 2.5% to $82.70 a barrel on ICE Futures Europe.

Forex

Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.0617 to highs near US$1.0693 and was near US$1.0680 at the US close. The Aussie dollar jumped from lows near US68.10 cents to highs near US68.80 cents and was near US68.60 cents at the US close. But the Japanese yen weakened from near 134.67 yen per US dollar
to JPY135.96 and was near JPY135.35 at the US close.

European Markets

European sharemarkets were subdued on Wednesday as investors treaded cautiously ahead of the US Federal Reserve’s rate decision. Real estate shares rose by 1.2% but mining stocks slid 1.7%. The continent-wide FTSEurofirst 300 index was flat and the UK FTSE 100 index dipped 0.1%. The annual rate of UK consumer price inflation dropped to 10.7% in November from a 41-year high of 11.1% in October (survey: 10.9%).

Asian Markets

Earlier Wednesday, Chinese stocks continued to retreat from the rally spurred by Beijing’s removal of a host of Covid-19 restrictions. Investors are looking to the economic policy meeting for the country’s top leaders this week. The Shanghai Composite Index finished flat. The Shenzhen Composite Index declined 0.1% and the ChiNext Price Index lost 0.3%.

Hong Kong’s Hang Seng Index finished a volatile day 0.4% higher as the city’s reopening continued to boost investor sentiment. Hong Kong’s tech sector, which some analysts say remains undervalued, led the gains. Japan’s Nikkei Stock Average rose 0.7%, led by electronics stocks, as concerns about U.S. inflation and the Fed’s aggressive tightening eased.