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Global stocks fell on Thursday as the dollar hit a two-year high and the Federal Reserve signaled it would cut interest rates more slowly next year to avoid any fresh inflation risks.
The quarter-point interest rate cut by the Fed on Wednesday was overshadowed by a cut to projected cuts in 2025, before Donald Trump takes office next month.
The dollar index, a gauge of the U.S. currency against six peers, hit its highest level since November 2022 in signs that the Fed is concerned about lingering inflation — and the threat that Trump's economic plans could add to price pressures. reached 1.1 percent at
European and Asian stocks fell after a heavy sell-off on Wall Street on Wednesday, as investors were rattled by the prospect that the Fed will cut borrowing costs less quickly.
Europe's benchmark Stoxx 600 fell 1 percent and the FTSE 100 fell 1.1 percent.
"Markets were surprised by the Fed's perceived indifference," said Mitul Kotecha, head of emerging market macro strategy at Barclays in Singapore.
Concerns about inflation staying above 2 percent contributed to Fed officials forecasting a cut of just half a percentage point in 2025, down from a full percentage point in their last projections in September.
In volatile trading late Wednesday, the S&P 500 index closed down 3 percent and the tech-heavy Nasdaq Composite fell 3.6 percent. Many of the biggest winners pulled back in a powerful 2024 equity rally.
In bond markets, the yield on the benchmark 10-year Treasury edged up 0.03 percentage points to 4.52 percent. The rate-sensitive two-year yield was flat at 4.35 percent after jumping 0.11 percentage points.
indicates that US interest rates Asian markets hit hard on Thursday, sharpening the appeal of the dollar, which could remain higher for a long time.
The Indian rupee fell to a record low of Rs 85.1 against the dollar. As the Chinese renminbi and Japanese yen fell sharply, South Korea's winnings sank to a 15-year low.
In equity markets, Australia's S&P/ASX 200 lost 1.7 percent, South Korea's Kospi lost 1.9 percent and India's Sensex lost 1.2 percent.
Meanwhile, Japan's currency-sensitive Nikkei 225 index fell 0.6 percent after the Bank of Japan picked up. Keep rates steady on Thursday.
“For Asia, which is struggling with relatively low yields and weakness in China putting pressure on the region, [today’s falls] There is a culmination of those factors,” said Scarlett Liu, a strategist at BNP Paribas.
Bitcoin, which fell more than 5 percent yesterday, gained 1 percent to $101,300 per token on Thursday.
"Given the risk of reviving inflation from potential trade tariffs and a slowdown in immigration that is cooling pressure on the labor market, the market is only for two more cuts in 2025," wrote Jean Bovin, head of the BlackRock Investment Institute. Expectations now seem reasonable", wrote Jean Bovin, head of the BlackRock Investment Institute. , in a note.