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Global Stocks Extend Decline After Fed Continues to Tighten Policy https://ift.tt/2xHSW2L Global stocks fell Thursday, as investors parsed the outcome of Federal Reserve’s decision to raise interest rates and awaited budget developments in Italy. The Stoxx Europe 600 fell 0.5% in early morning trade, dragged down by the banking and automotive sectors. Asian markets mostly fell. On Wall Street, futures pointed to an opening loss of 0.1% for the S&P 500. The index fell on Wednesday for the fourth straight session. The Fed on Wednesday said it would raise short-term interest rates by another quarter percentage point, and central-bank officials signaled they expected to lift them again later this year and through 2019. The central question for investors is how Fed officials can balance the need to raise rates to keep the economy from overheating without hurting growth in the process. The U.S. economy has been growing at a fast pace this year and the unemployment rate has fallen to multiyear lows. Federal Reserve Board Chairman Jerome Powell testifies during a hearing before the Senate Banking, Housing and Urban Affairs Committee on July 17 on Capitol Hill. Photo: Alex Wong/Getty Images “The pace of U.S. growth will slow with the Fed moves, higher oil prices and waning effect of tax cuts,” said Guy Miller, chief market strategist at Zurich Insurance Group. “This has an impact for the rest of the world, too.” The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.2%. The 10-year U.S. Treasury yield fell to 3.035%, compared with 3.059% on Wednesday. Yields move inversely to prices. International trade frictions continued to be a focus for money managers after U.S. President Donald Trumpaccused China of trying to interfere in the forthcoming midterm elections. The world’s two economies have been embroiled in a trade spat this year, with both sides introducing tariffs, amid growing concerns about its impact on the global economy. “The trade dispute between the U.S. and China does not look like it’s ending soon,” said Paul Donovan, global chief economist at UBS Wealth Management, in a note to clients. Investors were also watching developments in Italy where the nearly four-month-old government prepares to outline its fiscal and economic projections that underpin its budget which will be discussed in October. However, reports that a budget meeting scheduled for Thursday might be delayed sent the euro down 0.4% against the greenback. Italian bonds sold off, with yields on country’s 10-year note rising to 2.939%. “Reports of an Italian budget delay heaps political pressure on the euro,” said Viraj Patel, a strategist at ING Bank. “Should we see any budget delay, expect [the euro] to move sharply lower.” In Asia, Japan’s Nikkei Stock Average fell 1% while Hong Kong’s Hang Seng was down 0.4%. In commodities, Brent crude, the global oil price benchmark, was up 1% while gold was up 0.1%. Write to Georgi Kantchev at georgi.kantchev@wsj.com Business via Wall Street Journal http://online.wsj.com September 27, 2018 at 03:03AM
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