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GLOBAL MARKETS-Dollar jumps, stocks fall after Fed rate outlook; pound stalls

Published 31/07/2019, 22:03
© Reuters.  GLOBAL MARKETS-Dollar jumps, stocks fall after Fed rate outlook; pound stalls
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* Fed cuts rates by 25 basis points, further cuts not
certain
* Dollar rally cuts into pound bounce-back
* Dow down nearly 500 points at session low

(Updates with U.S. market close)
By Rodrigo Campos
NEW YORK, July 31 (Reuters) - The dollar index hit a more
than 2-year high and stocks tumbled after Federal Reserve
Chairman Jerome Powell said Wednesday's 25-basis-point rate cut
was not the same as the beginning of a lengthy easing cycle.
Powell, speaking in a news conference after the release of
the Fed statement, characterized the rate cut as "a mid-cycle
adjustment to policy," comments that do not imply sharp further
cuts are on the way. Some market participants were expecting the Fed to leave the
door open for further cuts or even a 50 basis point cut after
Wednesday's meeting, so the less dovish stance sent U.S. stocks
to session lows and the dollar index soaring.
"Two additional rate cuts are not written in stone by a long
shot, and there's been some talk about a pause," said Hugh
Johnson, chief investment officer at Hugh Johnson Advisors in
Albany.
"Now you start to raise doubts about (the additional) cuts,
then that's not good news for the stock market."
The Dow Jones Industrial Average .DJI fell 333.75 points,
or 1.23 percent, to 26,864.27, the S&P 500 .SPX lost 32.8
points, or 1.09 percent, to 2,980.38 and the Nasdaq Composite
.IXIC dropped 98.20 points, or 1.19 percent, to 8,175.42.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.70.
Emerging market stocks lost 0.59 percent. MSCI's broadest
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS
closed 0.69 lower, while Nikkei futures NKc1 lost 0.77.
In currencies, the sharp move higher in the dollar ate into
a pound rebound, though the British currency was still slightly
up against the greenback after four days of declines.
"We are just seeing some stabilization after very bad four
days," said Lee Hardman, FX strategist at MUFG. "It doesn't
change the bigger picture and the pound will continue to weaken
but clearly it won't be a one-way street," Hardman added.
The pound earlier rose as much as 0.8% against the dollar
near $1.225 but was last trading at $1.2161, up 0.10 percent on
the day.
It closed July with its weakest monthly performance against
the dollar since October 2016.
The dollar index .DXY rose 0.52 percent, with the euro
EUR= down 0.7 percent to $1.1075. The dollar powered higher partly as the Fed "acknowledged
strong labor markets, recent reasonable signs of moderate
growth. It still leaves the playing field wide open as to what
they're going to do in future months," said Tony Bedikian, head
of global markets at Citizens Bank in Boston.
The Japanese yen weakened 0.15 percent versus the greenback
at 108.79 per dollar.
In commodities, crude oil futures settled higher for the
fifth straight day, buoyed by a bigger-than-expected drop in
U.S. inventories, but the stronger dollar helped bring prices
down from session highs in post settlement trading. O/R
U.S. crude futures settled at $58.58, up 0.91% per barrel
and Brent settled up 0.7% at $65.17. WTI was in the red in post
settle trading.
The yields on U.S. government debt were in part weighed down
by the tumble in stocks.
Benchmark 10-year notes US10YT=RR last rose 13/32 in price
to yield 2.0161, from 2.061 late on Tuesday.
Spot gold XAU= dropped 1.3 to $1,412.30 an ounce. Copper
CMCU3 lost 0.13 to $5,940.00 a tonne.



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Trade tension hits stocks https://tmsnrt.rs/2JNPb3M
Euro zone inflation and GDP https://tmsnrt.rs/2ypndmT
Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
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