Published: Sun, March 19, 2017
Markets | By Terence Owen

Wall Street to open higher on Fed's 'gradual' rate-hike outlook

Wall Street to open higher on Fed's 'gradual' rate-hike outlook

This, as the US dollar hit a five-week low following the Federal Reserve's cautious message on interest rates, thus making bullion cheaper for holders of non-U.S. currencies.

The weaker dollar after the Fed raised rates as expected also helped to make the greenback-denominated crude less expensive for holders of other currencies.

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.

The MSCI world equity index, which tracks shares in 46 countries, jumped 0.7 per cent on the day to reach an all-time high after the Fed lifted its funds rate by 25 basis points, but said further increases would only be "gradual".

Minneapolis Fed President Neel Kashkari was the lone member to vote against the rate hike, preferring to leave rates unchanged. Stocks in South Korea and Australia fell.

USA stock indexes took a small step back Thursday, while bond yields recovered some of their sharp losses from Wednesday.

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The euro also firmed, but is struggling as investors nervously await the Dutch election outcome. The Swiss franc gained nearly half a percent against the euro while the yen inched back into positive territory, touching a more than two-week high.

Nevertheless, since the start of the year investors have traded French government debt at a heavier discount from ultrasafe German bonds, which means they are still distrustful of polls after last year's decision by Britain to leave the European Union and Donald Trump's victory in the US, both of which came as a surprise.

Dutch Prime Minister Mark Rutte's party won a parliamentary election victory over anti-Islam lawmaker Geert Wilders.

Yields on 10-year U.S. Treasuries nursed their heaviest falls since last August. With a rate increase by the Fed seen as a done deal, investor focus is shifting to what message the central bank will deliver when it concludes its meeting on Wednesday. But Fed officials made a concerted effort to warn the markets of the high likelihood of a Fed rate hike and expectations then soared to a near-certainty, Chen said.

Shares of Tesla rose 2.8 percent to $262.94 after the electric carmaker said it would raise about $1.15 billion as the company speeds up the launch of its Model 3 sedan. If it closes lower Thursday, that would be the eighth decline in the last nine days. The dollar slipped to 113.02 Japanese yen from 113.26 yen.

CURRENCIES: The euro from dipped to $1.0746 from $1.0749 late Thursday, and the British pound fell to $1.2367 from $1.2358.

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