Currency traders work near screens showing the foreign exchange rates at the foreign exchange dealing room in Seoul, South Korea, Thursday, Sept. 27, 2018. Asian markets were mixed on Thursday after the U.S. Federal Reserve lifted its key interest rate as expected for the third time this year. (AP Photo/Lee Jin-man)

World shares slump as Fed pushes rate higher

September 27, 2018 - 6:34 am

SINGAPORE (AP) — European and Asian markets fell Thursday after the U.S. Federal Reserve tightened its monetary policy and raised interest rates for the third time this year.

KEEPING SCORE: In Europe, France's CAC 40 shed 0.2 percent to 5,499.30 and Germany's DAX fell 0.4 percent to 12,340.45. Britain's FTSE 100 was almost flat at 7,512.28. U.S. stocks were set for a lackluster open. Dow futures fell 0.2 percent to 26,379.00. The broader S&P 500 futures rose 0.1 percent to 2,914.20.

ASIA'S DAY: Japan's Nikkei 225 dropped 1.0 percent to 23,796.74. South Korea's Kospi, which reopened after a national holiday, added 0.7 percent to 2,355.43. Hong Kong's Hang Seng index slipped 0.4 percent to 27,715.67. The Shanghai Composite Index lost 0.5 percent to 2,791.77. Australia's S&P ASX 200 was 0.2 percent lower at 6,181.20. Shares rose in Taiwan, Indonesia and the Philippines but fell in Singapore and Thailand.

FED RATE HIKE: On Wednesday, the Fed signaled its confidence in the U.S. economy by raising a key interest rate for a third time this year. It lifted its short-term rate — a benchmark for many consumer and business loans — by a modest quarter-point to a range of 2 percent to 2.25 percent. Hong Kong has adjusted its base interest rate to match the move, and other Asian economies which have their currencies pegged to the dollar may soon follow suit. Chairman Jerome Powell said this did not amount to a policy change. The Fed also forecasted another rate hike by end 2018 and predicted that it will continue to tighten credit into 2020 to manage growth and inflation.

ANALYST'S TAKE: "The markets are having a mild hangover from yesterday's Fed meeting. Although the Fed raised interest rates, they adopted a dovish point of view by saying they won't be as accommodative going forward," Oriano Lizza, sales trader at CMC Markets in Singapore, said in an interview.

ITALY BUDGET: Italy's government will meet to discuss the 2019 budget on Thursday. Economy minister Giovanni Tria is facing pressure from the two governing parties to balance promises made during this year's election and commitments the country needs to abide to as a member of the eurozone.

JAPAN-US TRADE: Prime Minister Shinzo Abe said Wednesday that he had agreed to go ahead with bilateral trade talks with the U.S. despite having rejected such negotiations earlier. The move won Japan relief from the immediate threat of punitive tariffs on its auto exports to the U.S., which would have significantly escalated trade tensions. The two sides said they also would seek to resolve differences over U.S. tariffs on imported steel and aluminum.

ENERGY: Benchmark U.S. crude rose 81 cents to $72.38 per barrel in electronic trading on the New York Mercantile Exchange. The contract dropped 1 percent on Wednesday to close at $71.57. Brent crude, used to price international oils, added 67 cents to $81.46 per barrel. It settled at $80.79 per barrel in London.

CURRENCIES: The dollar rose to 112.78 yen from 112.73 yen. The euro fell to $1.1712 from $1.1739.

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