US stock and bond prices rose, while the dollar fell yesterday after the Federal Reserve decided to hold US interest rates near zero on concerns about global weakness but left the door open for a rate increase later this year.
The move was not a complete surprise, as a poll by Reuters released on Wednesday showed a majority of economists expected no rate hike.
The futures market had implied traders assigned a low probability the Fed would raise rates for the first time in nearly a decade after its two-day policy meeting.
“Given the global headwinds, the last thing we need right now was a hike in rates and any kind of hawkish projections,” said Brian Dolan, head market strategist at DriveWealth in Chatham, New Jersey.
The Dow Jones industrial average was up 46.63 points, or 0.28 per cent, to 16,786.58, the S&P 500 was up 8.95 points, or 0.45 per cent, to 2,004.26 and the Nasdaq Composite was up 29.66 points, or 0.61 per cent, to 4,918.90.
Share market yesterday gave up some of its gains from the previous session, with engineering companies such as Smiths Group and Weir Group falling on concerns about peer Rotork’s outlook.
Rotork, which makes valve-automation equipment used in the oil and gas, power and nuclear industries, fell 10.8 percent. The company said it expected a decline in full-year revenue and operating profit after projects were deferred and cancelled and trading in August was “particularly weak”.
Smiths Group, whose clients include oil majors BP and Chevron Corp, fell 4.2 per cent. Traders blamed the effect of Rotork’s update.
“Engineers, especially those operating in the oil and gas sector, have a grim outlook given weaker oil prices. The challenging environment has been forcing oil companies to defer or cancel orders, hitting revenues of engineering firms,” said Jawaid Afsar, a trader at Securequity.
Another valve and pump maker, Weir Group, fell 2.6 per cent. It was also hurt by its demotion from Britain’s FTSE 100 index following a quarterly reshuffle.
Engineering and support services company Babcock International fell 2.5 per cent. Exane BNP Paribas cut its target price for the stock to 900 pence from 1,050 pence, saying “we are becoming increasingly concerned about the earnings risk profile.”
In the mid-caps, oil field service provider Hunting fell 6.9 per cent, while engineering supply group
Premier Farnell’s shares touched six-year lows, down almost 16 per cent. The company reported a drop in full-year adjusted operating profit and said it would sell its industrial product division Akron Brass.
The FTSE 100 index was down 0.7 per cent at 6,186.99 points at its close. It gained 1.5 per cent in the previous session, when it set a one-week high.
Brent crude was last down 47 cents or down 0.94 per cent, at $49.28 a barrel. US crude was last down 12 cents, or down 0.25 per cent, at $47.03 per barrel.
Spot gold prices rose $9.06 or 0.81 per cent, to $1,128.21 an ounce.