The Chinese yuan remained relatively stable on Thursday morning, bouncing between small gains and losses, after the People's Bank of China strengthened the currency's fixing to the strongest in seven months following a rate increase by the US Federal Reserve Wednesday night. Japan's benchmark slipped as the yen gained against the dollar.
The central bank forecast another rate increase later this year, alongside efforts to reduce its trillion-dollar holdings of USA government debt. This rate hike comes for the second straight time in 2017. All participants agreed to augment the Committee's Policy Normalisation Principles and Plans by providing the following additional details regarding the approach the FOMC intends to use to reduce the Federal Reserve's holdings of Treasury and agency securities once normalisation of the level of the federal funds rate is well under way.
The pan-European STOXX 600 index dropped 0.5 percent, led lower by the basic resources and oil and gas sectors, as the stronger dollar weighed on metals prices.
In currency markets, the dollar was up 0.2 percent against a basket of major peers, having earlier traded in negative territory as investors wondered whether the Fed would be able to raise rates again this year. Shares of Elon Musk's electric auto company are up more than 75% so far this year.
The market had already anticipated a rate hike by Fed, as the Federal Reserves' Chairman Janet Yellen had given many signals of a rate hike. However, equity investors seemed to take Yellen more seriously sending cyclical stocks lower driven by the tech sector.
Professor Yang Jun-sok and other Korean economy experts said that the South Korean central bank is now cornered into making a move for the economy sandwiched between capital outflow and household debt concerns. That spurred selling of real estate developers' shares. Many U.S. stocks will be vulnerable to an ongoing tightening in financial conditions especially those with overstretched valuations. Bond yields hit their lowest level of 2017. The S&P 500 technology index ended down 0.5 percent, but well off its lows for the day.
The Dow Jones industrial average was up 22 points, or 0.1 percent, to 21,352, little changed from before the announcement.
It means the USA central bank is scaling back its support for the economy as it continues to recover and grow.
Brent crude, the global benchmark, was down 12 cents a barrel at $46.88.
Meanwhile, copper for July delivery fell 0.3% to $2.5655 a pound in NY. Brent crude, used to price worldwide oils, fell 16 cents to $46.84 a barrel. It had shed $1.72, or 3.5 percent, to close at $47 a barrel in London. The euro dropped to $1.1160 from $1.1217.
Be Civil - It's OK to have a difference in opinion but there's no need to be a jerk. Inflation is right around the corner.