As expected the European markets opened in the shadow of Wednesday evening’s Federal Reserve rate rise and post-hike statement.
To the surprise of no-one – and to the immense displeasure of Trump – Jerome Powell and his FOMC peers unanimously agreed to lift US interest rates from 2% to 2.25%, the 3rd increase of 2018 and the 8th since late 2015. More important was the future path laid out by the Fed, with the suggestion of another hike in December, 3 more in 2019 and 1 in 2020. And while Powell was perhaps a tad more dovish than some had forecast, the central bank chief implicitly allowing for future flexibility in the face of trade war uncertainties, the dollar still benefited from the update.
Against the pound and the euro the greenback rose half a percent apiece, sending cable below $1.312 and the single currency under $1.171. The Dow Jones, meanwhile, got a kicking overnight, with the US index set to open near a one week-plus low of 26350 later in the day.
All this led to a European open of varying negativity. The FTSE managed to stay above 7500 as it slipped 0.1%, the pound’s losses and Brent Crude’s charge back across $82 per barrel (and the subsequent gains for BP (LON:BP) and Shell (LON:RDSa)) preventing the UK index from suffering the losses seen elsewhere. The DAX wasn’t as lucky, plunging nearly 1% as it dropped below 12300, with the CAC abandoning 5500 as it fell 0.4%; the FTSE MIB took the title for worst performer, however, shedding 1.8% as investors fretted over the Italian budget.
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