Markets cautious ahead of Fed announcement

Posted March 19, 2017

U.S. stocks slipped on Thursday as healthcare and utilities stocks fell while financials rose with bond yields as traders reversed their initial reaction to the U.S. Federal Reserve's policy statement, which was more dovish than expected. On Wednesday, the US central bank is nearly universally expected to raise its benchmark interest rates, a move that just a few weeks ago was viewed by the markets as unlikely.

Jeffrey Nichols, senior economic adviser for Rosland Capital, said recent gold trade has been driven in part by tapering momentum in the S&P 500 index SPX, -0.06% and the Dow Jones Industrial Average DJIA, -0.05% which have cooled their record-setting pace lately. Taiwan's dollar touched a 10-month high, South Korea's won strengthened over 1 percent and commodity currencies such as the rand and rouble rose around 0.5 percent.

The dollar fell 0.7 percent against a basket of key currencies and hit a one-week low against the yen, while the euro hit a session high against the greenback.

USA stocks closed higher on Wednesday, as oil prices bounced back and the Fed took a less hawkish stance than expected.

Precious metals prices climbed on Thursday to their highest level in over a week after the United States central bank signalled only gradual rate tightening and the dollar slid to its lowest in five weeks. The index on Tuesday fell 0.3%.

Investors were also looking ahead to the Group of 20 finance leaders' meeting in Germany this weekend, where any attempt by the Trump administration to pursue protectionist policies could fuel demand for gold as a safe haven.

A widely anticipated US interest rate hike combined with a dovish outlook for the future path of rates lifted emerging stocks to 20-month highs on Thursday but also prompted a number of developing central banks to tighten monetary policy. After the United Kingdom vote last summer to leave the European Union, investors were anxious about whether a wave of nationalism across the continent could eventually break the European union apart.

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The central bank also indicated that it still expects three moves, as each Fed members' expectations for where rates will be in coming years changed little from the last meeting. The yield on the 10-year Treasury rose to 2.52% from 2.50% late Wednesday.

However, the Fed stuck to its outlook for two more rate hikes this year and three more in 2018.

EARNINGS POP: Tech giant Oracle jumped 7.1% to $46.12, notching the biggest gain in the S&P 500, after reporting stronger revenue and earnings for its latest quarter than analysts expected. If it closes lower Thursday, that would be the eighth decline in the last nine days.

Spot gold had edged up 0.1 percent to $1,199.34 per ounce by 0040 GMT.

The euro bought $1.0621, compared with $1.0605 late Tuesday in NY.

USA gold futures were down 30 cents an ounce at $1,226.80.