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Global Markets Follow Wall St.’s Slide After Fed’s Move on Rates Wall St. Tumbles, Bothered by the Fed and Government Shutdown Fears
(about 4 hours later)
Stocks extended their run of losses Thursday, as investors reacted with disappointment to decisions from central banks around the world. Stocks extended their run of losses Thursday, as investors continued to react with disappointment to the Federal Reserve’s outlook on interest rate increases, and new worries spread out from Washington about a possible Christmastime government shutdown.
On Wall Street, the S&P 500 was down in early trading, adding to a decline that has wiped more than 9 percent off the benchmark just this month. On Wall Street, the S&P 500 was down in early afternoon trading, adding to a decline that has wiped more than 9 percent off the benchmark just this month. On Wednesday, the Federal Reserve raised its benchmark interest rate a quarter-point and indicated that more rate raises might come in the new year, a sign of measured confidence in the economy.
Investors had been looking for the Federal Reserve to indicate that it would moderate the pace of monetary tightening because of growing concern about the economic outlook. Instead, the Fed increased rates by a quarter-point on Wednesday and said it will keep doing so while also shrinking the extraordinary amount of support it has provided to financial markets. The Fed cited the strength of the United States economy, which has remained healthy even as global growth shows signs of slowing. Investors had been looking for Fed policymakers to indicate a moderating pace of monetary tightening because of growing concern about the economic outlook, and the S&P closed down 1.5 percent on Wednesday.
On Thursday, the Bank of Japan fueled investors’ negative mood by maintaining its monetary policy, despite hopes that it too would offer some form of help for an economy that is contending with a slowdown. The Japanese economy contracted in the third quarter. Steven Mnuchin, the Treasury secretary, said on Thursday that the reaction of markets to the Federal Reserve is “completely overblown” and American stocks continue to be a “tremendous value.”
Mr. Mnuchin, in an interview on the Fox Business Network, blamed the advent of computerized trading for creating more dramatic swings in the stock market and argued that the United States continues to be a good investment opportunity. He said he remained optimistic that economic growth can top 3 percent next year.
The Treasury secretary also pointed out that inflation projections remain low, and that some members of the Federal Reserve indicated they do not see the need for additional interest rate hikes next year.
“If we have low inflation, continue to have low inflation, I think you’re going to see a different situation,” Mr. Mnuchin said.
The markets were also wary of a government shutdown. On Thursday, a deal to avert a shutdown was endangered as President Trump suggested on Twitter that he was unhappy with a stopgap spending plan because it did not contain money for a border wall.
On Thursday, the Bank of Japan fueled investors’ negative mood by maintaining its monetary policy, despite hopes that it too would offer some form of help for an economy contending with a slowing global outlook.
The Bank of England then announced it would keep its benchmark interest rate steady at 0.75 percent, and noted that concerns over Brexit are increasingly weighing on the British economy.The Bank of England then announced it would keep its benchmark interest rate steady at 0.75 percent, and noted that concerns over Brexit are increasingly weighing on the British economy.
In Britain, the FTSE 100 closed 0.8 percent lower. In France, the CAC 40 lost 1.8 percent, and Germany’s DAX fell 1.4 percent.
Shares in Japan led the decline in Asia, with the Nikkei 225 index down 2.8 percent after the Japanese central bank’s comments. Another closely watched Japanese stock index, the Topix, fell into bear market territory, meaning it is now down 20 percent from its peak.Shares in Japan led the decline in Asia, with the Nikkei 225 index down 2.8 percent after the Japanese central bank’s comments. Another closely watched Japanese stock index, the Topix, fell into bear market territory, meaning it is now down 20 percent from its peak.
In Britain, the FTSE 100 was down about 0.2 percent in early afternoon trading. Stocks in France and Germany were down about 1 percent.
Oil prices returned to their lows for the year.Oil prices returned to their lows for the year.