Fed interest rate hike: Wall Street dip curtails celebrations - as it happened

Graeme Wearden (until 3.30) and Nick Fletcher

from on 2015-12-17 17:53 (#XZ2C)

Dow slips back but markets rally in Asia and Europe, the dollar strengthens, and commodities fall, after US rate rise

5.53pm GMT

Over in Athens there has been some commotion this afternoon between Greece and its creditors. Our correspondent Helena Smith reports:

In a highly embarrassing move, the leftist-led government has had to withdraw its much-touted "parallel economic program" - outlining measures to ease the debt-stricken country's humanitarian crisis - under threat of having its next aid disbursement withheld. The program had been central to prime minister Alexis Tsipras' promise that while his government had been forced to swallow the bitter pill of austerity - the price of being bailed out to the tune of a86bn this summer - harsh reforms would be offset with assistance for the most needy.

Almost immediately there was uproar.

4.58pm GMT

With the Federal Reserve removing the uncertainty clouding markets by finally raising US interest rates, European markets responded favourably to the news. But an opening fall on Wall Street - which had surged in the immediate aftermath of Wednesday's Fed move - took some of the shine off, and European shares ended off their best levels. The rise in the US dollar following the announcement of dearer borrowing costs hit commodity prices, with Brent crude down 0.5%, and left energy shares lower. The closing scores showed:

3.58pm GMT

The IMF has commented on the Christine Lagarde situation:

IMF Communications Director Gerry Rice:"As we have said before, it would not be appropriate to comment on a case that has been and is currently before the French judiciary. However, the Executive Board continues to express its confidence in the Managing Director's ability to effectively carry out her duties. The Board will continue to be briefed on this matter."

3.52pm GMT

Here's the early take on Christine Lagarde facing trial:

3.46pm GMT

Wall Street continues to decline, following its immediate rise on Wednesday after the US Federal Reserve raised interest rates and promised only gradual increases in future.

After a near 225 point increase in the wake of the Fed announcement, the Dow Jones Industrial Average is now down 61 points or 0.35%.

3.17pm GMT

Christine Lagarde's lawyer has told Reuters that he will recommend she appeals the decision to try her over the Bernard Tapie affair.

3.15pm GMT

It looks like French journal Mediapart got the scoop about Christine Lagarde facing trial.

Here's their story:

3.05pm GMT

French media are reporting that the managing director of the International Monetary Fund, Christine Lagarde, is to face trial over the Tapie financial scandal that had dogged France.

BREAKING: French court orders IMF head Christine Lagarde to face trial over credit Lyonnais/Bernard Tapie affair - french media

2.44pm GMT

That didn't last long... the Dow is now down 30 points.

2.35pm GMT

US stocks open higher after rate hike https://t.co/4tB0iaAeZP pic.twitter.com/ULsP5emsvw

2.33pm GMT

Ding ding!

Shares are inching higher on Wall Street as traders returned to their desks in New York after yesterday's excitement.

2.12pm GMT

The latest weekly US unemployment figures are out.

And they don't suggest that the Fed made a catastrophic error by raising borrowing costs last night.

1.56pm GMT

Janet Yellen may not receive Christmas cards from many gold bugs this year.

The gold price has dropped by over 1% today to $1,058 per ounce, hit by the stronger dollar following the rise in US interest rates.

RT tbiesheuvel: The delayed Fed fallout. #Gold goes back below $1,060 https://t.co/lSynSfGS7i pic.twitter.com/CHGYxXUUNw #trading

1.36pm GMT

This chart shows how the peso has caught up with reality...

#Argentina Peso falls 29% after Macri lifts currency controls. Official Peso now near Black market Peso. pic.twitter.com/wl4HVUzAG2

1.34pm GMT

Argentina's currency has just slumped by 30% against the dollar as the government lifts foreign exchange controls that had kept it artificially high.

The peso is changing hands at 14 to the US dollar, from around 10 last night. That's broadly in line with the black market rate; a scarcity of US dollars has meant Argentines have had to pay much more than the official exchange rate.

*ARGENTINE PESO FALLS 29% TO 13.9/USD ON MAE IN BUENOS AIRES

"He who wants to import will be able to do so, and he who wants to buy dollars will be able to buy them."

1.12pm GMT

The bulls are out on the Frankfurt stock exchange today:

The decision to raise rates for the first time following almost a decade of crises and unconventional policy measures is being welcomed as much for its end to uncertainty as its vote of confidence in US economic recovery.

Has Yellen fired the starting pistol for a return to conventional policy and a delayed Santa Rally?

12.35pm GMT

Investors are pushing up the prices of eurozone government bonds today, in another sign that the Fed rate hike is being taken well.

This has pushed down the yield (or interest rate) on debt issued by every major eurozone country, and also the UK:

European bonds rally as #Fed emphasizes gradual eate trajectory https://t.co/j3Upxw0l5J via @anoojad pic.twitter.com/XgG9B4sVHY

"There were fears of a mistake from the Fed if it were too confident or too hawkish."

But it was good news ... so phew! We can go on the Christmas holiday. We can have a small rally everywhere."

12.13pm GMT

James Hughes, chief market analyst at trading company GKFX, captures the mood in the City:

Despite continued market rally it feels like Fed announcement was the end of the year for traders. Now lets all relax for Christmas

11.54am GMT

Bloomberg is reporting that Martin Shkreli, the entrepreneur who attracted global opprobrium after he raised the price of an anti-infective drug by more than 5,000 percent, has been arrested on securities fraud charges:

Details are a little scarce, but here's what they know so far:

Prosecutors charged him with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it pay off debts from unrelated business dealings. He was later ousted from the company, where he'd been chief executive officer, and sued by its board.

In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements.

Pharma CEO #MartinShkreli arrested on charges of securities fraud https://t.co/w5pnCbK3jQ

11.42am GMT

Spread-betting firms are predicting that the US stock market will hold onto yesterday's gains.

The Dow Jones industrial average is expected to open 58 points higher, according to IG.

11.16am GMT

Photographers have been hard at work across Asia, capturing today's market rally:

10.50am GMT

RBS has produced a handy chart showing how the markets are expecting US interest rates to rise much slower than in the past:

If the Fed hikes faster than expected, wtach out emerging markets! Blog: https://t.co/tozPYq6CNt pic.twitter.com/Kfj7HtrmLC

10.07am GMT

After two hours of trading, European markets are holding onto their early gains.

The rally is particularly strong in Frankfurt and Paris; traders are welcoming the Federal Reserve's confidence in the US economy, and its pledge to only raise rates gradually.

A sigh of relief swept across financial markets as Janet Yellen confirmed months of speculation and hiked interest rates by 0.25% for the first time in nine years. A very measured statement proceeded, with an almost academic approach of both positivity and caution.

Oil, copper, iron ore, platinum, silver and gold all lower...

9.44am GMT

Here's a surprise.... UK retail sales smashed expectations last month, as shoppers gorged on Black Friday bargains via the internet.

Super strong retail sales in UK looks as though it's helped a lot by online sales. Black Friday shopping from desk was a thing...

9.37am GMT

Breaking away from the Fed briefly, the latest survey from Germany shows that businesses are less optimistic this month.

9.32am GMT

Today's market rally may not last long, argues Michael Holland, managing director of ratings and research firm FE Trustnet:

After the pain of recent weeks, the current market rally will please many - but one suspects this is a bit of dead cat bounce. It should be seen more as a sigh of relief that something that was predicted actually followed through, rather than the markets are happy that the rate has been hiked.

Typically, interest rates going up is viewed negatively by the equity markets - because historically this means that they will see greater outflows as higher interest rates lure investors away.

9.24am GMT

The first Fed hike is the most exciting, but it still leaves borrowing costs very low in historical terms:

Your Fed hike in context from BofAML: pic.twitter.com/MXGk2VV6Jx

9.13am GMT

Commodity prices are hitting fresh 17-year lows this morning, as the impact of the Fed rate hike ripples through the market.

Copper, zinc and oil are all suffering, pushing Bloomberg's broad measure of commodity prices down towards record low levels:

Bloomberg Commodity Index extends losses to 76.70, approaching historical low at 74.24 pic.twitter.com/z0nHddulsr

8.45am GMT

The US dollar is strengthening this morning, sending it up against all the major currencies.

Last night's rate hike makes the dollar more attractive to investors, as it offers a higher rate of return.

The overnight reaction to the Fed rate hike has seen equity markets rally, oil prices remain very soft, commodity currencies fall back, and the dollar rally across the board.

I wanted a dollar dip to buy and so far, it's just gone up. The focus will now be on the timing of the next Fed move, the pace thereafter, and the implications for commodity prices, capital flows out of emerging markets and China's currency policy.

8.31am GMT

European stock markets are a sea of green:

8.25am GMT

The French stock market has jumped by 2%, as the wave of post-Fed relief reaches Paris. Germany's DAX is close behind. gaining 1.8%.

This is partly because the euro is losing ground against the US dollar, which is a boost to eurozone exporters:

8.18am GMT

Hearing the words "Fed hikes rates" is a new experience for anyone who joined the financial world after the crisis began:

Ben Brettell, senior economist at Hargreaves Lansdown, says:

"An interest rate rise is a new experience for much of Wall Street. A whole generation of traders have never known anything but the post-crisis world of ultra-low interest rates and, for the most part, rising asset prices. An estimated two-thirds of traders have never seen a full Fed tightening cycle.

Does this mean the people who'd never seen a hike don't have to buy the coffees any more?

8.07am GMT

Boom! European stock markets are open, sending traders rushing to buy shares in the post-Fed rally.

In London the FTSE 100 index of major blue-chip share jumped 97 points, or 1.5%, at the start of trading. Every share was positive, as a pre-Christmas spirit broke out across the City.

"While the equity markets are supposedly not the Fed's primary concern, for the board to deliver anything other than a raise would have caused mayhem.

"As it was the expectedly dovish hike, and Janet Yellen's frequent use of the word 'gradual' to describe the pace of future rises, came as a blessed relief to anxious stockwatchers.

8.02am GMT

When might the Fed raise rates next?

The financial markets suggest that the next hike, from 0.5% to 0.75% might not come until June:

7.55am GMT

The Guardian's editorial writers aren't impressed by last night's rate hike, calling it "risky and premature".

Here's why:

It is reassuring for America to feel like it is back in familiar waters - until it transpires that it is not. The quarter-point rate rise addresses one potentially serious problem, but does so in the wrong way. QE dollars have puffed up the price of some assets, and if that puffing goes unchecked, the next bubble and bust could begin. The right way to tackle speculative investment, however, is through targeted regulatory curbs on lending for speculative purposes, not by raising borrowing costs for all investments, including those that America needs.

The justification for higher rates should be a real economy moving at an unsustainable pelt. There's no sign of that.

Thursday's FT front page: Historic gamble for Yellen as Fed makes quarter-point rise #tomorrowspaperstoday pic.twitter.com/BNEGdrwDII

7.47am GMT

Apart from anything else, traders are simply relieved that the long prevarication over when US interest rates will rise has ended.

Our economics editor Larry Elliott explains:

The quarter-point increase in borrowing costs could hardly be called a spur of the moment decision. On the contrary, the Fed has shown Hamlet-like indecision this year as it has weighed up the pros and cons of abandoning the zero interest rate policy that has been in force for the past seven years.

Now, as Julius Caesar said when he crossed the Rubicon (with rather less dithering), the die is cast. The move is intended to signal that interest rates in the US will eventually return to normal.

7.40am GMT

Asian markets have picked up the baton from Wall Street, with shares jumping in Tokyo, Shanghai and beyond.

Japan's Nikkei jumped strongly, closing 1.6% higher, as investors took the long-awaited quarter-point rate hike in their strike. China's main market gained almost 2%, in a wide relief rally:

Confidence in the global economy received an uplift last night following the Federal Reserve's unanimous decision to finally raise US interest rates for the first time in almost a decade.

The Dollar was installed with some bullish momentum across the global currency markets, however it was repeated on several occasions as expected that future rate rises will be gradual.

7.18am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

What was all the fuss about, eh? After all the speculation and angst about higher US interest rates, financial markets are taking last night's historic move in their stride.

"Our European opening calls: $FTSE 6122 up 61 $DAX 10599 up 129 $CAC 4687 up 63 $IBEX 9833 up 122 $MIB 21480 up 269

Whilst the Fed has reinforced its message that subsequent rises will take place gradually, the FOMC's interest rate forecasts continue to point to a faster rate of tightening than is implied by market pricing, leaving room for considerable asset price volatility if economic developments continue along the lines that the FOMC currently expect.

How this gap between market and FOMC expectations closes will determine how financial markets behave over the coming year."

U.S. banks rush to raise prime rates to 3.5% (as expected) but keep deposit rates unchanged, a positive for NIMs https://t.co/esBrM5wWSa

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