CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Fourth Fed rate hike prompts global stock sell-off

Global stocks fell in reaction to the US Federal Reserve’s monetary tightening, with US futures forecasting further declines on Thursday.

Global stock markets tumbled in reaction to the US Federal Reserve’s fourth rate hike of 2018, with European and Asian equities falling on Thursday following Wall Street’s lead with the S&P 500 sliding 1.54%.

Declining US stocks precipitated the pan-European Stoxx 600 to fall by 1.4% - hitting a 25-month low. Elsewhere in Europe, the German Dax and French CAC 40 both slid 1.5%, with the FTSE 100 down 1.6% on Thursday – hitting a 28-month low.

Meanwhile in Asia, the Japanese Topix fell 2.5% following the Fed’s rate rise and the pan-Asian index for external Japanese equities slid 1.2%.

‘The Fed’s decision to push ahead with its fourth hike of 2018, but shave 25bp off its profile for expected hikes, has seen the US 2-10 year Treasury curve flatten further and risk assets suffer,’ ING strategist Chris Turner said.

‘The dominant reaction in financial markets has been one of caution, with price action largely driven by equities. Here investors are still overweight both US equities and the dollar,’ he added.

US futures signal further declines to come

On Thursday morning, US futures continued to fall after the Fed disobeyed President Donald Trump by raising rates.

The Dow Jones Industrial Average futures slid 123 points at 4:15am ET, with S&P 600 and Nasdaq futures also down, sending a strong signal to investors that further stock market declines are on the cards once markets open on Thursday.

The Fed’s Chairman Jerome Powell also made it clear that the central bank has no plans of slowing the pace of subsequent rate hikes after completing their fourth increase of the year.

‘I think that the run-off of the balance sheet has been smooth and has served its purpose, Powell said in a recent news conference. ‘I don’t see us changing that.’

Dollar down

US equites weren’t the only market to be hit hard by recent rate hike, with the US dollar falling 0.3% in the wake of the central bank’s decision. Meanwhile, the euro, pound and Japanese yen all witnessed slight climbs.

Sterling could see its slights gained eroded if the Bank of England decides to raise interest rates at midday on Thursday, though many analysts expect the UK central bank to leave rates unchanged.

‘Today’s BoE rate meeting is unlikely to influence GBP much given so much uncertainty,’ Turner said.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

See an opportunity to trade?

Go long or short on more than 17,000 markets with IG.

Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.