European, Asian shares jump after Wall St gains 1 pct * Fed flags possibility of Dec hike but outlook more dovish * Dollar falls, yen up in wake of BOJ policy shift * New Zealand leaves rates steady, further easing likely By Marc Jones LONDON, Sept 22 (Reuters) – World shares and bonds rallied on Thursday, after the Federal Reserve left USA interest rates unchanged and slowed the pace of future hikes, weakening the dollar and lifting commodity prices.
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The Fed did signal it could hike rates by year-end as the labour market improved further, but cut the number of rate increases expected in 2017 and 2018.
The Australian dollar edged up 0.25 percent to an nearly two-week high of $0.7641 after Reserve Bank of Australia Governor Philip Lowe said interest rate cuts and a weaker currency are helping the economy, and that it was “not particularly useful” to keep cutting rates in the hope that it will eventually lift growth.
The Norwegian krone strengthened 1.9% against the dollar to $0.1235 after Norway’s central bank left its main interest rate steady and suggested further reductions may no longer be needed because of a pickup in the economy.
But clearly, the indications were that there will be a rate hike later this year, even as future adjustments will be gradual.
However, “if the Fed raises interest rates, it can drop to $1,245 levels”, he cautioned. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. On Wednesday, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement, saying they favored raising rates this week. The central bank said risks to its economic outlook are “roughly balanced”. The yield on the 10-year Treasury note rose to 1.71 percent from 1.69 percent.
The US dollar index fell around 0.3 per cent against a basket of major currencies.
CHECKS IN THE MAIL: FedEx boosted its forecasts for the year as it projected a record holiday season, and the shipping company posted better first-quarter results than analysts had expected. The stock rose $11.21, or 6.9 percent, to $173.86.
Student lender Navient fell 51 cents, or 3.7 percent, to $13.28 after federal regulators began investigating one of its shareholders. Cooperman denied the charges. The technology giant’s stock rose 95 cents, or 1.7 percent, to $57.76.
Microsoft said it will buy back $40 billion in stock and also raised its quarterly dividend. It also reduced its longer-run interest rate forecast to 2.9 percent from 3 percent. Heating oil added 2 cents, or 1.7 percent, to $1.43 a gallon.
The euro rose to $1.1180 from $1.1157. US gold futures fell the same amount to $1,314.50 an ounce. Silver gained 49 cents, or 2.5 percent, to $19.77 an ounce. The Fed next meets November 1-2, but few observers expect an increase then.
ASIA’S DAY: The Shanghai Composite Index rose 0.5 percent to 3,042.31 and Hong Kong’s Hang Seng added 0.3 percent to 23,748.61.
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European markets are likely to follow suit, with financial spreadbetters predicting Britain’s FTSE 100 will open up as much as 0.6 percent, and Germany’s DAX and France’s CAC 40 will start the day about 0.8 percent higher. Tokyo’s Nikkei 225 reversed an early loss and closed 1.9 percent higher.
