Global Stocks, Bonds Surge After Fed Rate Hike

Central banks ruled over financial markets, as the Federal Reserve’s move to raise interest rates without accelerating the timeline for future tightening sent global stocks and bonds jumping. The dollar steadied after Wednesday’s losses.

Rallies from Seoul to Jakarta pushed the MSCI Asia Pacific Index to the highest since mid-2015, after the S&P 500 Index jumped by the most in two weeks. Hong Kong shares maintained gains as China followed the Fed in raising rates. The yen edged higher after the Bank of Japan kept its unprecedented monetary easing program unchanged. The yield on 10-year Treasuries traded below 2.5 percent, while gold and oil extended gains.

The Fed raised its benchmark lending rate a quarter point and continued to project two more increases this year. U.S. equities extended gains as Chair Janet Yellen said in a press conference that the “simple message is the economy is doing well.” Investors anticipated the tightening and Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of tightening. Those trades unwound late Wednesday in the U.S. as the Fed indicated it hasn’t fallen behind with its efforts to keep inflation in check.

Just hours after the Fed’s decision, the BOJ left its plans unchanged, increasing the policy divergence between the two central banks. With the economy slowly improving and bond yields under control, the BOJ is in position to hold steady for now. Meanwhile, China’s central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the Fed. The People’s Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility.

Investors also reacted to economic data and developments in European politics. The euro touched a one-month high Wednesday after Dutch Prime Minister Mark Rutte’s Liberals easily beat the anti-Islam Freedom Party of Geert Wilders. The Australian dollar and kiwi slipped amid disappointing reports on unemployment and gross domestic product.

Here are the main market moves:

Stocks

· The MSCI Asia Pacific Index rallied 1.4 percent as of 3:41 p.m. in Tokyo, to the highest level since June 2015. Benchmark indexes in Indonesia, Taiwan and Singapore rose at least 0.7 percent.

· Japan’s Topix rose 0.1 percent, gaining for the first time in three days. The benchmark index was down 0.1 percent before the BOJ’s decision.

· Hong Kong’s Hang Seng gained 1.5 percent while the Hang Seng China Enterprises Index jumped 1.7 percent.

· Futures on the S&P 500 were up 0.2 percent after the benchmark gauge rose 0.8 percent to 2,385.26 on Wednesday, the highest level since reaching a record on March 1. The Stoxx Europe 600 Index added 0.4 percent.

Currencies

· The Bloomberg Dollar Index dropped 0.1 percent, after losing 1.3 percent on Wednesday, its biggest decline since Jan. 17.

· The yen was up 0.1 percent at 113.25 per dollar after advancing 1.2 percent in the previous session.

· The euro rose 0.1 percent to $1.0740 after climbing 1.2 percent on Wednesday.

· The Australian dollar slipped 0.2 percent after jumping 2 percent Wednesday. Australian unemployment unexpectedly climbed in February as the economy shed jobs, indicating spare capacity remains a problem in the labor market and wages and inflation are likely to remain subdued.

· The New Zealand dollar declined 0.6 percent after data showed the economy grew at the slowest pace since mid-2015 as farm production and food manufacturing contracted.

Bonds

· The yield on 10-year Treasury notes held at 2.49 percent after tumbling 11 basis points on Wednesday. Similar Australian yields fell 10 basis points to 2.81 percent, and those in New Zealand also slipped 10 basis points to 3.28 percent. Japanese 10-year yields dropped three basis points.

Commodities

· WTI crude oil extended its gain, rising 0.6 percent to $49.15 a barrel after surging 2.4 percent Wednesday, its first advance in eight days.

· Gold added 0.6 percent to $1,226.59 an ounce, after rising 1.7 percent Wednesday.

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