European and Asian stocks slid Thursday following the interest rate hike by the U.S. Federal Reserve. Investor sentiment faltered after China and Hong Kong carried out modest hikes in tandem with the Fed, as British and European central bank decisions loomed.
Germany’s DAX edged 0.1 percent lower to 13,104.44 and France’s CAC 40 dipped 0.1 percent to 5,395.44. Britain’s FTSE 100 shed 0.2 percent to 7,482.37. Wall Street was poised to open higher. Dow futures rose 0.2 percent to 24,688.00 and broader S&P 500 futures inched up 0.1 percent to 2,672.60.
The Federal Reserve raised its benchmark rate for the third time this year as anticipated, increasing its short-term rate by a quarter point. Policymakers at the U.S. central bank said they plan to continue tightening, indicating three more rate hikes are in store for 2018. The Fed also raised its growth forecast for the U.S. economy, the world’s biggest, and predicted that the job market will continue improving.
The European and British central banks are also set to hold their final policy meetings of the year. The Bank of England is forecast to keep its main interest rate unchanged a month after raising it for the first time in a decade to keep inflation in check. Surprises aren’t expected either from the European Central Bank. Analysts are focusing instead on its latest growth forecast and any hints about the future of its multi-billion euro bond purchase stimulus program.
“While no significant changes are expected in terms of interest rates or asset purchases, markets could still move with the publishing of ECB’s new economic forecast,” said Hussein Sayed, Chief Market Strategist at FXTM. Meanwhile, the Bank of England “will continue to be overshadowed or influenced by Brexit talks,” but economic improvement and rising inflation could add pressure for a rate rise next year, he said.
China’s central bank reacted to the Fed’s interest rate increase by nudging up its own rate for lending to commercial banks. It left rates for borrowing by companies and the public unchanged. The People’s Bank of China said it was responding to market forces by raising the rate charged on its one-year lending facility by a relatively small margin of 0.05 percentage points. Hong Kong’s de facto central bank likewise raised its base rate by a quarter point. Because the Chinese financial hub’s currency is pegged to the U.S. dollar, it has no choice but to track U.S. monetary policy.
Japan’s benchmark Nikkei 225 index dipped 0.3 percent to 22,694.45 while South Korea’s Kospi gave up earlier gains to end 0.5 percent lower at 2,469.48. Hong Kong’s Hang Seng slipped 0.2 percent to 29,166.38 and the Shanghai Composite lost 0.3 percent to 3,292.44. Australia’s S&P/ASX 200 shed 0.2 percent to 6,011.30. Taiwan’s benchmark rose and Southeast Asian indexes were mostly higher.
The dollar rose to 112.84 Japanese yen from 112.54 yen late Tuesday. The euro slipped to $1.1822 from $1.1826.
Oil futures rebounded. Benchmark U.S. crude rose 11 cents to $56.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 54 cents to settle at $56.60 per barrel on Wednesday. Brent crude, used to price international oils, added 38 cents to $62.82 per barrel in London.