US stock market advanced on Wednesday after Federal Reserve kept the interest rate unchanged and lowered the forecast of rate hikes this year to two from earlier projection of four. The dollar weakened, the live dollar index shows the ICE US Dollar index edged down 0.9% to 95.723. The Dow Jones Industrial Average rose 0.4% to 17325.76, buoyed by a 2.6% rise in Caterpillar (NYSE:CAT). The S&P 500 gained 0.6% to 2027.22. Eight out of ten main sectors ended higher with materials and energy stocks leading the gainers, up 1.7% and 1.6% respectively as oil futures rose.
According to the central bank policy statement, US economic activity has been expanding at a moderate pace, with household spending gaining amid “soft” business investment and net exports. While Fed chair Janet Yellen acknowledged the slowdown in global economy, she said it hasn’t affected the Fed’s baseline projections for the US economy. Nevertheless, the revised projections of policy makers now indicate the median of core personal consumption expenditures – the Federal Reserve’s preferred inflation gauge, will rise 1.2% in 2016, down from a prior forecast of 1.6%. Federal Reserve still expects the preferred price gauge will rise 1.9% percent in 2017 and will hit the 2% target rate in 2018. The median of policy makers’ quarterly projections of federal funds rate was also revised downward to 0.875% at the end of 2016. This implies two quarter-point increases this year, down from four forecast in December. The dollar weakened after the release of dovish policy statement. Today at 14:30 CET initial jobless claims and unemployment claims will be released in US. The tentative outlook is negative. At the same time Philadelphia Fed Manufacturing Index for February will be published, it is expected to slip to negative 0.5 after recording negative 2.8 in February.
European stocks closed little changed on Wednesday ahead of the Federal Reserve interest rate decision. The euro strengthened to $1.1217 compared with $1.1107 late Tuesday after dovish Fed outlook indicated slower pace of interest rate hikes this year. The Stoxx Europe 600 index added 0.04%. Germany’s DAX 30 gained 0.5% to 9983.41. BMW (DE:BMWG) rallied 3.9% on news it will focus on electric vehicles and automated driving and develop its software and technology services as part of a new strategy. France’s CAC 40 lost 0.2%. Today at 10:30 CET Swiss National Bank Interest Rate Statement will be released. The central bank is expected to leave the interest rate at minus 0.75%. At 11:00 CET the final reading of February Consumer Price Inflation will be released in euro-zone. The tentative outlook is neutral. And at 13:00 CET Bank of England Rate Decision will be released. The bank is expected to leave the interest rate unchanged at 0.5%.
Nikkei fell 0. 2 % today as yen strengthened on dovish dollar outlook. Financial data on foreign and domestic purchases of bonds and stocks indicated foreign investors remained net sellers of Japanese stocks last week: a record 1.58 trillion yen worth of shares were sold in the week through March 12. Chinese stocks advanced with Shanghai Composite Index up 1.2%.
Oil futures prices are rising after ending sharply higher on Wednesday following reports major oil producers will meet next month to discuss the terms of a coordinated production freeze. April WTI crude rose 5.8% to $38.46 a barrel on the New York Mercantile Exchange. Russia, OPEC and other major producers accounting for 73% of global oil output will meet in Doha on April 17 to discuss plans for a freeze in output even if Iran declines to participate.