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Global stocks rise after Fed, Japan leave rates unchanged

26 September 2016

"We have not seen our job as always keeping inflation tightly in a narrow range", Lowe said.

The decision to stand firm drew dissents from three voting members of the Federal Open Market Committee - the first time that's happened since December 2014.

There were also some gyrations in currency markets, with the Fed decision pushing the United States dollar down against its global peers. Real estate companies rose as investors, comfortable that interest rates would remain low, looked for income. But even that could be derailed by disappointing economic data, and one increase probably wouldn't push bond yields much higher given signs that the Fed won't rush to raise rates next year, investors and analysts say.

After plunging below 1.4% in July, the yield on the US 10-year Treasury note reached 1.75% last week and was hovering around 1.7% before the Fed's decision. On Wall Street, the future for the Dow Jones industrial average was up 0.1 percent while the Standard & Poor's 500 was unchanged.

European share are seen opening little changed, with speadbetter picking a 0.1 percent fall in Britain's FTSE and 0.1 percent rise in Germany's DAX.

The US dollar index, which measures the greenback against a basket of six other major currencies, extended its decline to a five-day low of 95.515, off more than 0.50 per cent.

The dollar edged up to 100.78 yen from 100.51 yen. The central bank's story morphed once again. The Fed chose to leave interest rates unchanged on Wednesday, in a predictable decision that indicates improvements in the economy, but not enough strength to bear higher borrowing costs. Brent crude, used to price worldwide oils, rose 36 cents to $47.19 in London.

"Clearly the markets view the Fed's inaction as favorable. but if you read between the lines, the Fed is concerned about the strength of the economy", said Matt Schreiber, chief investment officer at WBI Investments in Red Bank, New Jersey.

Policymakers scaled back their median projection of the long-term interest rate to 2.9 percent from 3 percent in June.

Shares of FedEx jumped, up 6.8 per cent as of 3.08pm in NY, after the shipping company upgraded its full-year earnings forecast, and offered an upbeat outlook on the impact of its acquisition of TNT Express. US crude was up 1.08 percent at $45.83 a barrel, after climbing 2.9 percent in the USA session. Japan's benchmark Nikkei 225 index jumped 1.9 percent on the news.

Nowhere has a more ultra-easy monetary policy than Japan, where the central bank said on Wednesday it would persist with its massive asset-buying and negative rates, while at the same time shifting its policy framework to one more suited to a long battle against deflation.

"Fundamentally, it did not amount to an easing of monetary policy, but merely offers policy tweaks at the margin and a strengthening of forward guidance", said Frederic Neumann, co-head of economic research at HSBC.

The decision caused bond prices to rise and the US dollar to fall against other major currencies, which in turn help boost commodity prices since they are priced in dollars.