TOKYO (AP) – Global shares were mixed Thursday after the Federal Reserve raised interest rates for the first time in a year. The quarter percentage point rate increase, the second in a decade, was widely expected although investors were surprised to see the Fed project three more increases for 2017.
KEEPING SCORE: Britain’s FTSE 100 lost 0.3 percent to 6,949.19 but Germany’s DAX gained 0.6 percent to 11,304.64. The CAC 40 of France also rose 0.6 percent, to 4,796.98. U.S. shares looked set for a tepid start, with S&P 500 futures flat and Dow futures up 0.1 percent.
FED’S MOVE: The hike took the Fed’s key short-term rate to a range of 0.50 percent to 0.75 percent. Investors reacted to the Fed’s announcement Wednesday by selling stocks that would be most hurt by higher interest rates, which raise the cost of borrowing and can slow corporate profits and economic growth. The Fed also raised its forecast for rate hikes in 2017 to three from two.
WALL STREET BLUES: Stocks had their worst day in two months after the Fed’s announcement, and four stocks fell for every one that rose on the New York Stock Exchange. The Standard & Poor’s 500 index fell 18.44 points, or 0.8 percent, to 2,253.28, its biggest percentage loss since mid-October. The Dow Jones industrial average fell 118.68 points, or 0.6 percent, to 19,792.53. The Nasdaq composite fell 27.16, or 0.5 percent, to 5,436.67.
HONG KONG’S FED FOLLOW: The Hong Kong Monetary Authority, the city’s de facto central bank, immediately took the Fed’s lead and raised its overnight “discount window” lending rate by a quarter point to 1 percent. Hong Kong’s dollar is pegged to the U.S. dollar, so the Chinese financial center has no choice but to follow what the Fed does. The HKMA’s chief executive, Norman Chan, said local interest rates will continue to track movements in the U.S. and “the rising trend is expected to continue to be affected by the scale of outflows from the Hong Kong dollar, international developments and other factors.”
ASIA’S DAY: Japan’s Nikkei 225 index dipped and then recovered lost ground, gaining 0.1 percent to 19,273.79. Hong Kong’s Hang Seng fell 1.8 percent to 22,059.40 and Australia’s S&P ASX 200 dropped 0.7 percent to 5,538.60. South Korea’s Kospi was flat at 2,036.65 and the Shanghai Composite index fell 0.7 percent to 3,117.68. India’s Sensex added 0.1 percent to 26,630.69.
CURRENCIES: The rate hike caused the dollar’s value to surge overnight by more than 1 percent against other currencies. Late Thursday in Asia, the dollar was at 117.70 yen slightly below its previous close of 117.74 yen. The euro was at $1.0496 up from $1.0471.
ANALYST’S VIEWPOINT: “A key risk is for further capital outflows from Asian emerging markets’ assets as investors rebalance portfolios toward the strengthening U.S. dollar and higher U.S. interest rates,” Rajiv Biswas of HIS Global Insight said in a commentary. “Further capital outflows from Asian emerging equity and bond markets in 2017 could create volatile conditions in the more vulnerable global emerging markets with significant external account and domestic macroeconomic imbalances.”
ENERGY: Benchmark U.S. crude rose 15 cents to $51.19 a barrel in electronic trading on the New York Mercantile Exchange. It dropped $1.94 a barrel on Wednesday. Brent crude, the international standard, gained 48 cents to $54.37 a barrel in London.