ASX 200 to fall after Fed signals rate hike in March

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ASX 200 to fall after Fed signals rate hike in March

Source: ©Shimanovichs   | Megapixl.com
Image source: Shimanovichs | Megapixl.com

Highlights

  • The Australian share market is expected to rise on Thursday.

  • According to the latest SPI futures, the ASX 200 is likely to open 0.5% lower.

  • After rising for most part of the day, the Dow Jones fell 0.38%, the S&P 500 declined 0.15%, and the NASDAQ ended flat.

The Australian share market is expected to fall on Thursday after US Federal Reserve indicated it might raise interest rates in March and reiterated its stance of paring bond purchases. Fed also raised concerns on rising local COVID-19 cases. On the other hand, tension between Russia and Ukraine pushed oil prices to highs not seen since 2014.

According to the latest SPI futures, the ASX 200 is likely to open 0.5% lower. The benchmark index fell 2.5% to 6,961.6 points in the last session. The Australian markets were closed on Wednesday on account of a public holiday.

After rising for most part of the day, the Dow Jones fell 0.38%, the S&P 500 declined 0.15%, and the NASDAQ ended flat.

In its latest policy update, Fed signaled it is expected to hike interest rates in March. "With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate," the Federal Open Market Committee said in a policy statement.

Fed also informed that its policy-setting members had reached an agreement on shrinking its balance sheet. It said that the process may start sometime after interest hikes begin.

The MSCI world equity index rose 1.14%.

Bond yields

US Treasury yields started rising after the policy statement was issued by Fed. The benchmark 10-year yield surged to 1.7940% shortly after the statement. The dollar index rose 0.456%.

Oil prices rise

Oil prices hit US$90 a barrel for the first time in seven years (since October 2014), amid tight supply and rising political tensions between Russia and Ukraine.

  • Brent crude rose US$1.76, or 2%, to settle at US$89.96 a barrel.
  • WTI crude closed up US$1.75, or 2%, to US$87.35 a barrel.

Gold prices falls

Traders sold gold after Fed signalled a rate hike in March.

  • Spot gold fell 1% to US$1,829.65 per ounce at 12:19 p.m. ET (1719 GMT).
  • US gold futures fell 1.1% to US$1,831.40.

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