Global Stocks Slip and Treasury Yields Rise After Fed Minutes
Investor Sentiment Impacted by Fed Meeting Minutes
Global stocks slipped and Treasury yields rose as investors digested the minutes from the Federal Reserve’s last policy meeting. The minutes reaffirmed expectations that the U.S. central bank won’t be cutting interest rates anytime soon, leading to a subdued market sentiment.
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Fed Policymakers Express Concerns
The minutes of the Jan. 30-31 session showed that most Fed policymakers were worried about the risks associated with cutting rates too soon. There is broad uncertainty about the duration for which borrowing costs should remain at their current level.
Market Reaction to Rate Expectations
The two-year Treasury yield, which reflects interest rate expectations, rose significantly, while MSCI’s global stock gauge shed 0.47% in response to the Fed’s stance on rate cuts.
Economists’ Projections and Market Expectations
A slim majority of economists polled by Reuters now expect the Fed to start cutting rates in June, indicating a shift from previous market expectations. Expectations for the number of rate cuts this year have also adjusted to align more closely with the Fed’s projections.
Stocks and Currencies Respond to Changing Rates Outlook
Stocks fell in Europe, and the changing rates outlook has bolstered the U.S. dollar and impacted the yen, which is sensitive to U.S. rates. Chinese authorities’ efforts to prop up economic growth raised doubts about the growth outlook, affecting global stocks and commodities.
Oil Prices and Iron Ore Futures
Oil prices rose 1% amid geopolitical tensions in the Middle East, while iron ore futures declined to their lowest point in nearly four months. These fluctuations underscore the broader impact of changing economic sentiments on global commodity markets.
