Global stock prices declined on Thursday following mixed signs from the US Federal Reserve about the future path of interest rates.
The Fed kept its target for the overnight rate unchanged at 0.25% to 0.5% on Wednesday, but did acknowledge that the economy had “slowed” since its last meeting in December.
“The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the Fed announced in its policy statement.
US stocks declined sharply Wednesday afternoon after the statement was released, with the Dow Jones Industrial Average closing down 223 points. American stock futures were little changed overnight.
Asian stocks finished mostly lower on Thursday. In China, the Shanghai Composite Index fell 2.9% to close at its lowest level since November 2014. The Shanghai Shenzhen CSI 300 Index fell 2.6%.
Elsewhere in Asia, Japan’s Nikkei 225 fell 0.7%. Hong Kong’s Hang Seng Index advanced 0.8%.
Unease over the Fed weighed on European markets on Thursday. The Stoxx Europe 600 was down 1.4% in afternoon trade, reversing earlier gains. Germany’s DAX slumped 1.9%. In London, the FTSE 100 was down 0.9%.
In economic data news, German inflation picked up in January, a sign the European Central Bank (ECB) will be in no hurry to increase its quantitative easing program. The annual consumer price index rose to 0.5% in January from 0.3% the previous month, official data showed on Thursday.
Germany’s harmonized index of consumer prices (HICP) rose to 0.4% annually in January from 0.2% the previous month.
The combination of Fed uncertainty and firmer inflation figures pushed the euro back above 1.09 US. The EUR/USD exchange rate reached a session high of 1.0934 on Thursday. It would later settle at 1.0918, adding 0.2%.
In US data, durable goods orders plunged in December, the latest sign the country’s manufacturing sector is spiraling into recession.
Orders for manufactured goods meant to last three years or more declined 5.1% in December after slipping 0.5% in November, the Commerce Department said. The decline was partially attributed to a firm dollar, whose strength has not abated at the start of 2016 despite global financial instability.
In commodities, oil prices spiked above $34 a barrel on Thursday on reports that major oil producers will meet next month. The news raised hopes that OPEC and non-OPEC countries may cooperate to cut production levels in an attempt to rebalance the oversupplied market.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.