The markets were stuck in the first act of A Christmas Carol on Thursday, with Ebenezer Powell and the Federal Reserve ruining any hopes of a pre-Xmas turnaround.
Raising interest rates for a fourth time this year as expected, the wording of Jerome Powell’s statement suggested the central bank was on track for 2 more hikes in 2019, down from the previously hinted at 3 increases. However, that was still 2 too many for investors, with the maintenance of the ‘gradual’ rate rise phrasing sending the Dow Jones doolally, especially since the Fed also cut its growth outlook for next year to 2.3%, a steep drop off from 2018’s estimated 3%.
The Dow’s 350 point plunge set the tone for a nasty Asian session, one that saw the Nikkei shed 3%, and has led to a horrendous start for the European indices. Tumbling another 2%, the FTSE is barely holding above 6650, a level not seen since September 2016. The DAX, meanwhile, lost 200 points, with the CAC sinking back under 4700 as it too fell 2%.
Though the losses were pretty damn massive for the global indices, the dollar wasn’t best pleased with the Fed either. It shed 0.3% against the pound, 0.4% against the yen and half a percent against the euro, the greenback taking a slightly different view of the extent of the central bank’s dovishness to its index counterparts.
There’s actually plenty non-Fed stuff for investors to focus on this Thursday; whether any of it can break through is another matter entirely. The latest retail sales figure is expected to bounce from -0.5% to 0.3% month-on-month, though that does sound a bit optimistic, while investors will be curious to hear what the Bank of England has to say for itself as the markets head into a Brexit-blighted 2019.
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