Markets are relatively quiet this morning after the decision by the US central bank to raise interest rates last night saw the US dollar continue its recent rise, while stock markets threaten to end their latest ascent. As the attention now turns to the Bank of England who announce their latest policy at midday, the FTSE 100 is lower by 9 points and the pound little changed.
FOMC: better late than never
After increasing the Federal Funds Rate for the first time in almost a decade last December, the FOMC hinted at four further rate hikes during 2016. Due to certain circumstances leading to a myriad of excuses for not hiking, the final meeting of the year finally saw another rate rise which was by then widely expected by the markets. Slight upward revisions to the economic projections and an unusually hawkish Yellen have added more fuel to the moves in FX and the fixed income space since the US election, with US ten-year yields and the US dollar both continuing their upward trajectory. However the moves in the stock market are not so clear and whilst it remains close to its all-time high and within striking distance of the big 20,000 level, the Dow Jones Industrial Average didn’t take the news too well and posted its largest decline since before the election. The focus now shifts to the Bank of England who meet at midday, and whilst a change in rates in London is highly unexpected the accompanying statement could be of interest with the potential for a more Hawkish shift arising due to growing inflationary pressures in the UK economy.
Gold continues to plunge
The price of Gold bullion took another leg lower in light of the Fed hike and the precious metal now sits nearly $200/oz lower than it did on the election night. This drop has been sorely felt in Fresnillo (LON:FRES) and Randgold Resources (LON:RRS), with the two worst performing shares on the FTSE 100 off by 8.9% and 7.0% respectively. The rising dollar has also weighed on mining stocks with BHP Billiton (LON:BLT), Glencore (LON:GLEN) and Rio Tinto (LON:RIO) all seeing some early selling pressure. Despite the sizeable selling in these stocks the benchmark as a whole is holding up fairly well, largely thanks to a resurgence in banking stocks with Barclays (LON:BARC), RBS (LON:RBS) and Lloyds (LON:LLOY) all building on their recent gains.
Yahoo suffers second data breach
Shares in Yahoo have seen some selling in the pre-market since news has broke that the tech company has had more than a billion user accounts affected in a hacking attack dating back to 2013. The news comes as a worrying development in security terms after the internet giant announced as recently as September that it suffered a 2014 breach, in which 500 million accounts were accessed. Whilst the incidents are not believed to be related, the close proximity to which they have been made public may cause concern for shareholders who have overall enjoyed a pleasing performance throughout 2016.
There is some speculation that the latest hacking scandal could be state-sponsored, however there is no evidence as of yet to support this theory - the previous attack in 2014 was also believed by the firm to be an act that was sponsored by a state. The news comes at a bad time for the firm, with Verizon currently proposing a $4.8bn acquisition of Yahoo and these events may see the US mobile carrier modify or even abandon its bid. A consumer backlash against the firm due to another security breach, which makes the prior one not seem like an isolated event, could cause Verizon to value Yahoo less favourably.