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 Stocks and currencies in emerging markets, however, which are more
vulnerable to higher U.S. interest rates, welcomed the Fed's
decision on Thursday to postpone "lift off" for at least another
month, and rose across the board.
The FTSEuroFirst index of leading 300 shares fell 0.8 percent in
early trade to 1,413 points, Germany's DAX fell 1 percent to 10,129
points, and France's CAC 40 was down 0.9 percent at 4,615 points.
Britain's FTSE 100 index also followed Wall Street's overnight lead,
and was down 0.3 percent at 6,170 points. U.S. futures pointed to a
steady open later on Friday.
European government bond yields tumbled, tracking the 2-year U.S.
Treasury yield's biggest fall since Treasuries were first included
in the Fed's quantitative easing bond-buying stimulus program in
March 2009.
The 10-year German Bund yield was down 10 basis points in early
trading, on course for the biggest one-day fall since early July and
the third biggest this year.
A growing number of economists, including those at Morgan Stanley
and Barclays, are now wondering whether the Fed will raise rates at
all this year, given its concerns over growth and market volatility,
as well as the strength of the dollar.
"Now it's a waiting game again and every upcoming meeting is on the
table so long as data and conditions can justify a move. However,
there is no guarantee that the conditions will be satisfactory ahead
of the end of 2015," said Lee Ferridge at State Street.
Fed Chair Janet Yellen said the global outlook has appeared to
become less certain, adding that recent falls in U.S. stock prices
and a rise in the value of the dollar already were tightening U.S.
financial market conditions.
The Fed's fresh economic projections showed 13 of 17 policymakers
still foresee at least one rate hike in 2015, down only slightly
from 15 at the last forecast made in June. But it also trimmed its
forecasts for 2016 and 2017 economic growth.
RE-EMERGING MARKETS
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan rose 1 percent to a four-week high. It was the index's
third consecutive daily increase, something not seen since early
July.
Yellen explicitly noted the central bank was focusing on the
slowdown in China and emerging markets, saying one key issue is
whether there might be a risk of a more abrupt slowdown in China.
[to top of second column] |
A sudden devaluation of the yuan by the People's Bank of China's
last month surprised global markets and stoked worries that its
economy may be in worse shape than previously thought.
A Barclays survey of more than 700 global investors published this
week showed that most believed Chinese growth figures are
overstated, with more than half of those saying by as much as two
full percentage points.
"Yellen made clear that pending (Fed) meetings remain 'live' but the
repeated references to 'international developments' made clear that
the Fed is likely to remain cautious," RBS rates strategists said in
a note to clients on Friday.
Emerging market equities rose to one-month highs on Friday, with
MSCI's broadest emerging market index up 0.6 percent and on track
for the biggest weekly rise since early April, with 3.7 percent
gains.
However, Japan's Nikkei average, in line with other developed equity
markets, ended three days of gains to close 2 percent lower.
In currencies, the dollar was still on the defensive, having fallen
more than 1 percent immediately after the Fed's decision. The dollar
index against a basket of major currencies was down a quarter of one
percent to a three-week low of 94.301 on Friday.
The euro was steady at $1.1435 in early European trade on Friday,
near a three-week high of $1.1441 hit on Thursday. The dollar fell
0.5 percent against the yen to 119.40 yen.
U.S. debt yields remained under downward pressure, with the two-year
note's yield slipping further to 0.667 percent, only a day after it
hit a 4 1/2-year high of 0.819 percent.
In commodities, U.S. crude futures were down 0.7 percent at $46.54
per barrel, but still up more than 4 percent on the week. Brent was
steady at $49.15 a barrel.
Gold took heart from the dollar's travails and hit a two-week high
of $1,136 per ounce. It last stood at $1,131.80.
(Reporting by Jamie McGeever; Editing by Larry King; To read Reuters
Global Investing Blog click on http://blogs.reuters.com/globalinvesting;
for the MacroScope Blog click on http://blogs.reuters.com/macroscope;
for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
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