The U.S. central bank also cautioned in minutes of its July 29-29 meeting that economic recovery remains highly uncertain, that job gains in May and June had likely slowed, and that “substantial improvement” in the labor market would hinge on a “broad and sustained” reopening of businesses.
“The minutes are saying that the Fed doesn’t really seem interested in implementing yield-curve control,” said Nancy Davis, chief investment officer of Quadratic Capital in Greenwich, Connecticut.
Trillions of dollars in stimulus, equal to 14% of gross domestic product, has led to asset price inflation and currency depreciation, Davis said. The equity and fixed-income markets are totally disconnected, Davis added.
Some investors had been hoping that the Fed might follow through on a proposed policy to cap yields at a certain level by buying short-term debt, a move that would reinforce the central bank’s guidance that rates are staying low for now.
Longer-maturity U.S. Treasuries rose on the news, which said policymakers judged yield caps and targets are “not warranted” now but should remain option for future.
Treasuries Benchmark 10-year notes last rose 5/32 in price to yield 0.6541%, from 0.669% late on Tuesday.
The 30-year bond last rose 22/32 in price to yield 1.3705%, from 1.399%.
The dollar index , which reflects the greenback’s value against six leading trading currencies, rose 0.88%, with the euro down 0.75% to $1.184. The Japanese yen weakened 0.62% versus the U.S. currency to 106.05 per dollar.
Before the Fed news, the S&P 500 and the Nasdaq hit all-time highs, driven largely by Apple Inc . Its shares rose 1.4% to make it the first publicly listed U.S. company to reach $2 trillion in market capitalization, with strong results from retailers Target and Lowe’s also lifting sentiment.
But Wall Street later retreated. The Dow Jones Industrial Average fell 0.29%, the S&P 500 lost 0.28% and the Nasdaq Composite dropped 0.41%.
The dollar index rose 0.805%, with the euro down 0.67% to $1.1849.
The Japanese yen weakened 0.46% versus the greenback at 105.88 per dollar.
Spot gold prices fell 2.99% to $1,941.06 an ounce.
Brent crude futures fell $0.18 to $45.28 a barrel. U.S. crude futures slid $0.04 to $42.85 a barrel.
Earlier, in Europe, travel and leisure shares rose, with British Airways owner International Airlines Group up 5.3% on a British plan to use COVID-19 testing at London’s Heathrow Airport to help cut the time travelers have to spend in quarantine.
MSCI’s benchmark for global equity markets rose 0.25% to 573.33, while its index for emerging markets stocks rose 0.45%.
Europe’s broad FTSEurofirst 300 index added 0.68% to 1,434.54.
Also Watch
Overnight, MSCI’s broadest index of Asia-Pacific shares outside of Japan fell 0.2%, retreating from a seven-month high hit after the S&P 500’s record.
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor
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