GLOBAL MARKETS-Stocks rise, dollar falls after Fed hikes as expected


ADP work is smoother than expected


Fed hiked by 25 basis points

(Update with Fed statement, closed in European markets)

By Chuck Mikolajczak

NEW YORK, Feb 1 (Reuters) – A gauge of global shares rose and U.S. dollar and Treasury yields were lower on Wednesday after the Federal Reserve raised its target interest rate to an expected but communicated 25 basis points more increases were on the horizon.

The Fed said the US economy is enjoying “modest growth” and “strong” job gains, and policymakers remain “extremely alert to inflation risks” as it seeks to tighten financial conditions and reign in prices. that tall Markets have priced in the possibility of a rate cut by the Fed in the back half of the year.

On Wall Street, US stocks were choppy after the Fed’s announcement, but turned positive as Chairman Jerome Powell began speaking.

“The Fed’s key focus is on wages and we see wage inflation continue to improve if you look at both average hourly wages and the labor price index that just came out, wages are starting to soften, but not softening enough to bring inflation down to the target.” that’s 2%,” said Ellen Hazen, chief strategist at FLPutnam Investment Management in Wellesley, Massachusetts.

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“They’ve had a slightly dovish shift in language where they were previously talking about determining the pace of future increases and now they’re talking about determining the extent of future increases.”

Investors will be closely watching Fed Chairman Powell’s comments for further signals on the central bank’s policy path.

The Dow Jones Industrial Average fell 5.45 points, or 0.02%, to 34,080.59, the S&P 500 gained 30.83 points, or 0.76%, to 4,107.43 and the Nasdaq Composite added 173.22 points, or 1.17%, to 1.77. 75 a.

Before the policy announcement, economic data painted a mixed picture, with a labor market remaining strong while manufacturing activity continued to weaken, showing contraction for a third month.

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Investors saw a weaker labor market as a key factor in bringing down stubborn inflation.

Earnings season continues as well, with Facebook owner Meta reporting earnings after the closing bell on Wednesday. Later in the week will bring earnings from names like Apple and Amazon.

Early gains for European shares faded to close virtually unchanged ahead of the Fed’s statement, although industrial shares, up 0.85%, were a bright spot. On the heels of the Fed, the European Central Bank (ECB) and the Bank of England will make their policy statements on Thursday, in which each is widely expected to hike by 50 basis points.

The pan-European STOXX 600 index closed down 0.03% and MSCI’s measure of shares across the globe gained 0.81%.

Data on Wednesday showed headline inflation in the euro area moderated to 8.5% in January, from 9% in December, while core prices picked up to 7% from 6.9%, likely to keep pressure on the ECB to increase Aggressive interest rates.

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The dollar started February on a lower note, continuing to weaken its trajectory in the previous four months. The dollar index fell 0.823%, and the euro rose 0.99% to $1.097.

The Japanese yen strengthened 0.94% against the greenback at 128.89 per dollar, while sterling was last traded at $1.2378, up 0.47% on the day.

U.S. Treasury yields rose after the statement, but were still lower on the day, as the benchmark 10-year note fell 11.6 basis points to 3.413%, from 3.529% late on Tuesday, although the two-year yield a little time turns higher after the most. latest batch of economic data.

US crude recently fell 2.93% to $76.56 per barrel and Brent was at $82.91, down 2.98% on the day.

(Reporting by Chuck Mikolajczak; Editing by Jonathan Oatis and Diane Craft)


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