* Fed cuts rates by 25 basis points, next cut not a given
* Pound bounces back from 28-month low
(Updates with Fed statement, market reaction)
By Rodrigo Campos
NEW YORK, July 31 (Reuters) - The dollar index rose on
Wednesday and stocks tumbled even as the Federal Reserve cut
interest rates after Fed Chairman Jerome Powell said the
25-basis-point cut was not the same as the beginning of a
lengthy rate cutting cycle.
Some 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 to a more than two-year high.
"The Fed signaled that it is going to be data dependent but
markets were priced for a more dovish outlook which the Fed did
not deliver on,” said Collin Martin, director of fixed income at
the Schwab Center for Financial Research in New York.
"Markets were priced for a quarter-percentage-point cut but
maybe they were looking for clarity that a second cut would be
coming soon, some sort of a calendar based guidance.”
The Dow Jones Industrial Average .DJI fell 244.8 points,
or 0.9%, to 26,953.22, the S&P 500 .SPX lost 21.03 points, or
0.70%, to 2,992.15 and the Nasdaq Composite .IXIC dropped
55.37 points, or 0.67%, to 8,218.25. MSCI's gauge of stocks across the globe .MIWD00000PUS shed
0.66%.
Emerging market stocks lost 0.80%t. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.89%
lower, while Nikkei futures NKc1 lost 0.40%. In currencies, the sharp move higher in the dollar ate into
a pound rebound, though the British currency was still 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.
Sterling GBP= was last trading at $1.2171, up 0.18% on the
day. It is on track for its weakest monthly performance against
the dollar since October 2016.
The dollar index .DXY rose 0.44%, with the euro EUR=
down 0.58% to $1.1088. 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 0.12% versus the greenback at
108.76 per dollar.
In commodities, crude oil futures rose 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. O/R
U.S. crude CLc1 rose 0.05% to $58.08 per barrel and Brent
LCOc1 was last at $64.49, down 0.22% on the day.
The yields on U.S. government debt were weighed down by the
tumble in stocks.
Benchmark 10-year notes US10YT=RR last rose 13/32 in price
to yield 2.0179%, from 2.061% late on Tuesday.
Spot gold XAU= dropped 0.9% to $1,418.00 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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