US stocks added to gains, while Treasury yields fell and the dollar weakened late yesterday, after the Federal Reserve raised interest rates for the second time in three months but did not flag any plan to accelerate the pace of monetary tightening.
The central bank's rate increase was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target. Investors had widely expected the rate increase.
Earlier yesterday, the MSCI’s all-country world stock index gained 0.2 per cent. On Wall Street, major equity indexes rose, with the energy sector rising 1.2 per cent.
The Dow Jones Industrial Average rose 44.47 points, or 0.21 per cent, to 20,881.84, the S&P 500 gained 7.32 points, or 0.31 per cent, to 2,372.77 and the Nasdaq Composite added 8.39 points, or 0.14 per cent, to 5,865.21.
Investors were also assessing data on US retail sales, which registered their smallest increase in six months in February.
The pan-European STOXX 600 index gained 0.4 per cent, helped by energy and basic resource stocks. Shares of aircraft seats maker Zodiac Aerospace tumbled 16 per cent after it issued a profit warning.
The focus in Europe also was on Dutch elections, where anti-EU firebrand candidate Geert Wilders is providing the latest test of anti-establishment and anti-EU sentiment. It also comes ahead of votes later this year in France and Germany.
“The repercussions for France are the key aspect of this election, and if we see that the populists are keeping their momentum that will be reflected in French government bonds,” DZ bank strategist Christian Lenk said.
Attention was also turning to today’s G20 meeting in the German spa town of Baden-Baden, the first that will be attended by US President Donald Trump’s economic team.
Oil prices were lifted by a surprise drawdown in US crude inventories and data from the International Energy Agency suggesting Opec cuts should create a crude deficit in the first half of 2017.
US crude rose 1.9 per cent to $48.64 a barrel, after touching a three-month low a day earlier, while benchmark Brent gained 1.8 per cent to $51.82 a barrel. The dollar fell 0.2 per cent against a basket of key currencies ahead of the Fed decision. The euro edged up 0.2 per cent .
The US Treasury yield curve flattened, with two-year yields touching their highest since mid-2009 and long-dated yields falling, as investors braced for a rate increase and the potential for a more aggressive pace of future tightening. Prices on benchmark 10-year Treasuries rose 2/32 to yield 2.589 percent, from 2.595 per cent late on Tuesday.