Shares take breather after Fed rally

·3-min read

World shares have consolidated a six-week high as investors scented a possible slowdown in the pace of US rate hikes that had comforted bond markets and sent the dollar to a three-week low on the yen.

Europe made an upbeat start as record-busting $US11.5 billion profits from oil giant Shell sent commodities shares soaring, although momentum quickly faded ahead of what was expected to be some shaky euro zone confidence data later.

The US Federal Reserve had surprised no one by lifting rates 75 basis points (bps) to 2.25 per cent-2.50 per cent on Wednesday, but did alter its statement to cite some softening in recent data.

Fed chair Jerome Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped guidance on the size of the next rate rise and noted that "at some point" it would be appropriate to slow down.

Just the hint of a less aggressive Fed though had been enough to send MSCI's 47-country index of world shares up 0.4 per cent, putting it firmly on course for its first back-to-back run of weekly gains since March.

With Europe now facing a gas crisis, and increasingly likely a recession according to economists, the STOXX 600 stalled after rising as much as 0.5 per cent.

The FTSE and DAX slipped into the red although Italy's FTSE MIB remained one per cent higher.

In Asia, Japan's Nikkei had added 0.4 per cent on Thursday despite a jump from the yen. South Korea climbed 0.8 per cent although Chinese blue chips lost traction late on having been brightened earlier in the session by reports Beijing was planning more support for a hard-hit property sector.

Wall Street also looked set to take a post-Fed breather, with S&P 500 futures 0.2 per cent lower and Nasdaq futures down 0.5 per cent, after the tech-heavy index had enjoyed its biggest daily gain since April 2020 on Wednesday.

Yet shares of several major US tech companies, including Meta Platforms, slid after hours as poor quarterly results and outlooks underscored recession fears.

Attention will also be on US GDP data for the second quarter. Median forecasts are for growth of 0.5 per cent, but the closely watched Atlanta Fed estimate of GDP is for a fall of 1.2 per cent.

In bond markets, two-year Treasury yields steadied at three per cent after falling 6 bps after the Fed meeting.

Europe's benchmark 10-year German bund yield climbed five basis points in morning trading, which left it on the cusp of one per cent again.

In currencies, the dollar index eased a fraction to 106.260 after losing 0.7 per cent overnight as risk sentiment improved.

It also suffered a rare setback on the Japanese yen, falling 0.7 per cent to 135.56 as some investors decided to book profits on a host of long positions.

The euro hovered around $US1.0204, having bounced 0.9 per cent overnight.

A drop in crude inventories and a rebound in petrol demand in the United States also supported prices.

Brent rose another $US1.40 to $US108 a barrel while US crude gained $US1.50 to $US98.73.

Spot gold was 0.6 per cent firmer at $US1,744 an ounce.

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