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Fed holds U.S. rates steady, hints at pause in further rate hikes

02 February, 2019, 07:40 | Author: Lawrence Cooper
  • Watch the Fed's Press Conference Wednesday

Asian shares crept back from four-month highs on Friday as a dismal survey on Chinese factory activity dulled optimism about the prospects for a China-US deal on tariffs.

"Dollar/yen is expected to remain weak given a dovish Federal Reserve but we can expect a bigger move down if there is a return of risk-off sentiment", said Sim Moh Siong, currency strategist at Bank of Singapore. -China trade deal might be on the cards.

The data suggests slower US growth and adds to a growing list of economic readings indicating slowing global growth.

The economist likens the situation to that of the cycle in 2004-6 when the Fed hiked interest rates 17 times to a high of 5.0%, and although he does not expect interest rates to rise as high as that in this cycle, the pattern will probably be similar.

Futures indicated a timid start to trading on Wall Street.

The International Monetary Fund predicted the global economy will grow at 3.5 percent in 2019, down 0.2 percentage point from last October's forecasts, citing weakness in Europe and some emerging markets.

A record number of balance-sheet bombs are threatening the stock market's health.

The Fed held interest rates steady as expected on Wednesday but discarded pledges of "further gradual increases" in interest rates, and said it would be "patient" before making any further moves amid a cloudy outlook for the USA economy due to global headwinds.

The Fed held rates steady, discarded its promise of "further gradual increases" in rates and said it would be "patient" before making any further moves.

"The very dovish tone from the Fed is clearly supportive to risk", said an economist at Fidelity International.

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Sales in Southern California fell over -20% in the same period, the slowest rate since 2007, and triggered even deeper concerns about the state of the housing market in the USA and the broader economy. -China trade talks, negotiations over Britain's departure from the European Union on a rocky track, and US elected officials unable to agree on a budget.

Up until now, growth has been obscured by a slow Q1 due to shut-down and bad weather, and because the data has been delayed.

Broader risk sentiment remained somewhat robust after a top US negotiator on Thursday reported "substantial progress" in two days of high-level talks on trade with China.

The top US negotiator at the talks reported "substantial progress" in the talks. On Friday, the employment report is scheduled at around midday which includes the Average Hourly Earnings, Non-Farm Employment Change and the Unemployment Rate reports.

The previously upbeat mood was also chilled somewhat by White House insistence that March 1 was a hard deadline for a deal, a failure of which would lead to an increase in United States tariffs on Chinese goods. "Both sides also have an incentive, and arguably a growing incentive, to get a meaningful deal done". E-Mini futures for the S&P 500 eased 0.1 per cent and spread betters pointed to a marginally mixed start for European bourses. The Dow slipped 0.06 percent.

Of the 210 S&P 500 companies that have reported fourth-quarter results, 71 percent topped profit estimates, according to Refinitiv data.

The Nasdaq gained 9.7 per cent in the month and the Dow rose 7.2 per cent.

Against a basket of currencies, the dollar was a fraction firmer at 95.622 thanks in part to a pullback in the euro to $1.1439. The MSCI Asia Pacific Index jumped 1.2% while the MSCI Emerging mkt index added 1% - And while trade talks are in high gear in DC today - the excitement is all around the FED and their policy statement.Japan + 1.06%, Hong Kong +1.05%, China +1.05% and ASX - 0.37%.

The single currency took a knock when Bundesbank president Jens Weidmann painted an unusually bleak picture of the German economy, saying the country's slump will last longer than initially thought.



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