He believes that the anomalies in the May payrolls number was miscommunicated and suggests the Fed could still have hiked in the summer despite the shock result of the United Kingdom referendum on its European Union membership.
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Pushing yields on longer-term securities higher will be a boon to life insurers and other big institutional investors that have seen investment returns plunge after the BOJ imposed its negative interest rate policy in February.
Futures on the S&P 500 Index declined 0.1 per cent after the underlying gauge climbed 1.1 per cent on Wednesday after the Fed announcement. The Energy Information Administration said oil inventories dropped by 6.2 million barrels and gasoline inventories decreased by 2.5 million barrels last week. Japan’s benchmark Nikkei 225 index jumped 1.9 percent on Wednesday on the news.
Oil prices rose 1.5%, spurred by a surprise drop in USA crude inventories and a strike by oil workers in Norway which could affect output.
But the decision to kick the rate can down the road was far from unanimous.
Silver moved higher following confirmation from the Fed that interest rates were on hold at the September meeting, although the gains seen earlier in the day were perhaps more noteworthy.
The Fed, however, signalled it could still tighten monetary policy by the end of this year as the labour market improved further. Every word is there for a reason and “for the time being” is clearly suggesting that the rate hike is close.
The Dow was up about 30 points before the Fed’s decision was announced. The central bank is not expecting to hit its inflation target of 2.0% until 2018, unchanged from the previous outlook.
Japanese 10-year yields rose as high as 0.005 percent, turning positive for the first time since March, but last traded at -0.035 percent, up 2.5 basis points. That’s where it had been left for 7 years as the central bank tried to support growth coming out of the Great Recession.
Doubts about the sustainability of the market’s moves crept in quickly, particularly for the yen, which reversed direction against the dollar hours after the BOJ decision.
In Europe, the UK’s FTSE 100 Index eked out a 0.1 per cent gain, Germany’s DAX index added 0.4 per cent, while France’s CAC 40 index rose 0.5 per cent. “So how are they going to exceed 2 percent?”
Banco BPI rose 3.8 per cent after Spain’s Caixabank launched a bid for the Portuguese lender and slightly raised its offer price.
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Shares in Natixis and UBI Banca were up 4.1 per cent and 5.4 per cent respectively, while Barclays, up 3.1 per cent, also rose on the back of an upgrade to “buy” from HSBC, which said the sale of the bank’s non-core businesses would produce value for shareholders.
