Major US indices tumbled to fresh 2018 lows as the Federal Reserve announced an interest rate hike of 25 basis points to 2.25-2.50% as widely expected and signaled more interest rate hikes in 2019. US stocks were trading higher ahead of the announcement on expectations that the Fed would slow its pace of rate hikes. On the contrary, Powell said that the Fed would continue to reduce the size of its balance sheet at the same speed. The Dow Jones Industrial Average futures traded at a low of 23057, the S&P500 futures dropped to a low of 2480, and the Nasdaq futures plunged to a low of 6287.
The dollar index which measures the greenback against a basket of major currencies bounced off a ten-day low to close marginally higher at 96.97, supported by the Fed's interest rate hike. However, the dollar erased its gains ahead of the European trading session dipped again to 96.65. On the other hand, the US 10-year treasury yields fell to 2.74%, the lowest since April, and the 30-year yields dipped below 3% for the first time since August. Investors believe that the latest global economic developments and uncertainty will force the Fed to adopt a "wait-and-see" policy in 2019.
The Bank of Japan left its monetary policy unchanged with short-term interest rates at -0.1%. Bank of Japan Governor Kuroda said that the downside risks are centered overseas and that the Bank will make the appropriate decision when easing is needed. Moreover, he addressed the risks from trade protectionism and said that they should monitor the risks posed by US-China trade friction. The Japanese Yen strengthened as investors rushed to safe currencies as the global stock markets tumbled. The USDJPY fell to a seven-week low of 111.80, and the EURJPY tested a low of 127.47.
Gold prices retreated from a five-month high of $1257 to trade at a low of $1242 post the Fed decision. The precious metal bounced back up to $1248 during the Asian session amid a stock market sell-off. Meanwhile, the silver ounce fell from a seven-week high of $14.80 to settle at 14.58, and Palladium fell from an all-time high of $1283 to settle near $1270.
Oil prices surged slightly supported by short covering and a drop in US crude inventories. The Energy Information Administration reported that the US crude oil inventories fell 0.497 million barrels last week. The West Texas Intermediate crude futures rose 2.5% to $47.18, and the Brent futures added 0.8% to $56.45.
Major Economic Events
|9:30||UK||Retail Sales (MoM) (Nov)||0.3%||-0.5%|
|9:30||UK||Core Retail Sales (MoM) (Nov)||0.2%||-0.4%|
|12:00||UK||BoE Interest Rate Decision (Dec)||0.75%||0.75%|
|13:30||US||Philadelphia Fed Manufacturing Index (Dec)||15.6||12.9|
|13:30||US||Initial Jobless Claims||219||206|
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