Stocks slip after sobering Fed; dollar holds loss

By Adam Haigh

Asian stocks and U.S. and European equity futures saw modest declines after the Federal Reserve painted a long road ahead for repairing the economic damage from Covid-19, a contrast with the V-shaped recovery optimism that’s propelled global equities.

Treasuries consolidated gains made in the wake of the Fed decision, which featured fresh projections including an outlook for no interest-rate hikes through 2022. The dollar stayed lower. Equity benchmarks in Japan and Australian underperformed, while Hong Kong and China dipped and Korea was flat. Contracts on the S&P 500 were down after the index closed with a modest drop Wednesday. Crude oil fell. Thailand’s baht was the standout performer among emerging-market currencies, climbing more than 1% against the greenback.


Fed Chair Jerome Powell said the central bank had a briefing on yield-curve control, amid expectations from some economists that the Fed will follow Australia and Japan in adopting such a tool. The yield curve narrowed.

Still, the Nasdaq Composite closed at a record high Wednesday. Global equities remain up about 40% from their March lows as central-bank asset purchases and unprecedented stimulus sparked demand for risk assets. Treasury Secretary Steve Mnuchin said that the U.S. “definitely” needs additional fiscal stimulus, supporting prospects for another round this summer.

“There weren’t too many surprises from the Fed as they focused on delivering one clear message: no movement on interest rates for a very long time,” said Kerry Craig, a Melbourne-based global market strateist at JPMorgan Asset Management. The “dispersion of viewpoints across the committee reinforces the uncertainty in just how the economy will fare post-Covid.”

Elsewhere, Hong Kong’s dollar slipped to the lowest in a week in the wake of interventions by the city’s de facto central bank to temper appreciation pressure and maintain its currency peg.

These are some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 0.4% as of 11:47 a.m. in Tokyo. The index dipped 0.5% Wednesday.
• Japan’s Topix Index fell 0.9%.
• Shanghai Composite dipped 0.1%.
• Australia’s S&P/ASX 200 Index lost 2.1%.
• Kospi Index slid 0.1%.
• Hang Seng Index retreated 0.4%.
• Euro Stoxx 50 futures lost 0.8%.

Currencies

• The yen edged up to 106.99 per dollar.
• The offshore yuan was little changed at 7.0531 per dollar.
• The Bloomberg Dollar Spot Index was little changed after falling 0.5% Wednesday.
• The euro bought $1.1394, up 0.2%.

Bonds

• The yield on 10-year Treasuries was at 0.72% after sliding Wednesday.
• Australian 10-year yields dipped to 0.93%.

Commodities

• West Texas Intermediate crude slid 2.8% to $38.50 a barrel.
• Gold was at $1,733.31 an ounce, down 0.3%.

--With assistance from Rita Nazareth and Katherine Greifeld.