Federal Reserve lifts interest rates, Wall Street slips on faster rate hikes
America’s official interest rate has risen for the second time this year, and is now firmly higher than Australia’s.
Overnight, the Federal Reserve lifted the US benchmark lending rate by 0.25 per cent in a widely expected move — to a range between 1.75 and 2 per cent.
In comparison, the Reserve Bank kept Australia’s official cash rate at 1.5 per cent, its record low for the past 20 months.
Markets at 7:20am (AEST):
- ASX SPI 200 futures -0.1pc to 6,022, ASX 200 (Wednesday close) -0.5pc at 6,024
- AUD: 75.77 US cents, 56.63 British pence, 64.25 Euro cents, 83.63 Japanese yen, $NZ1.08
- US: Dow Jones -0.5pc at 25,201, S&P 500 -0.4pc at 2,776, Nasdaq -0.1pc at 7,696
- Europe: FTSE flat at 7,704, DAX +0.4pc at 12,890, CAC flat at 5,453, Euro Stoxx 50 +0.1pc at 3,480
- Commodities: Brent crude +0.8pc at $US76.45/barrel, spot gold +0.3pc at $US1,299.31/ounce, iron ore -0.3pc to $US67.02/tonne
Higher interest weighs on stocks
What took investors by surprise was the Fed’s projection that it would increase rates twice in the next few months, which was faster than the market had expected.
The notion of a more aggressive US central bank raised concerns about higher borrowing costs and ultimately weighed on stock markets.
On Wall Street, the Dow Jones index fell 0.5 per cent, or 120 points, to 25,201.
The broader S&P 500 tumbled by 0.4 per cent, while the technology-focused Nasdaq index dropped by a slight 0.1 per cent.
European markets closed mixed, with London and Paris flat, and Frankfurt rising moderately by 0.4 per cent.
Steady dollar and job figures ahead
ASX futures are down 0.1 per cent, which indicates the Australian share market is expected to open slightly lower, or with little change.
The Australian dollar is steady at 75.7 US cents. It was also buying 56.6 British pence, 64.2 Euro cents, and 83.6 Japanese yen.
In local economics news, the Bureau of Statistics will release its latest jobs and unemployment figures.
Economists are predicting unemployment will drop slightly to 5.5 per cent, with 18,000 new jobs created.
More to come.