Fed catalyses equity rally
Last night the US Federal Reserve kept interest rates unchanged, as expected. This was the second successive pause, and the market reaction was initially negligible. But US equities pushed higher as Fed Chair Jerome Powell began his press conference, perhaps surprisingly since he was only mildly dovish. He wouldn’t rule out raising rates at the Fed’s next monetary policy meeting in December, pointing out that there was still a long way to go to get inflation down to 2%, and keep it there. But he also said the risks around the Fed doing too much or too little to fight inflation have become more balanced. In addition, he noted that the FOMC is not considering or even discussing rate reductions currently. Another rate hike seems likely if US economic growth is ‘persistently above potential’ and if the recent easing of the tight labour market were to reverse.
The yield on the US 10-year Treasury note has tumbled since last night’s rate announcement. It was trading around 4.90% ahead of the decision, and was 4.71% this morning. This pull-back is helping to support US stock indices, particularly tech stocks which thrive on low borrowing costs. After tonight’s close Apple will announce its results. This is a particularly important market event as Apple is not only the largest corporation in the world by market capitalisation, but also closely integrated with China which is having its own economic issues.
The yield on the US 10-year Treasury note has tumbled since last night’s rate announcement. It was trading around 4.90% ahead of the decision, and was 4.71% this morning. This pull-back is helping to support US stock indices, particularly tech stocks which thrive on low borrowing costs. After tonight’s close Apple will announce its results. This is a particularly important market event as Apple is not only the largest corporation in the world by market capitalisation, but also closely integrated with China which is having its own economic issues.
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