Shares, dollar slip as jitters build on Fed, trade and tech

FEDERAL RESERVE LIKELY TO RAISE RATES AS MARKETS EXPECT FOUR HIKES IN 2018

World shares fell yesterday and the dollar eased off a three-week highs as markets awaited a likely increase in US interest rates and guidance on how many more to expect for this year.

Markets were also spooked by signs of a brewing global trade war — a Wall Street Journal report saying China was planning counter-measures against US trade tariffs. European shares fell and investors scurried for the safety of German government bonds and the Japanese yen.

And equity futures indicated that US stocks, which have been roiled by a hefty sell-off in technology shares this week, are set for another weak session.

The sell-off wiped some $50 billion (Dh183.5 billion) off the value of social media giant Facebook, leaving investors on edge as the Federal Reserve prepares to raise US rates for the first time this year.

The Facebook losses, caused by uproar over the alleged misuse of user data, have filtered through the tech sector, with shares in Twitter falling more than 10 per cent on Tuesday.

Reversing bounce

A pan-European equity index fell almost 0.3 per cent, its early weakness accelerating after the WSJ report on China and a tech shares index reversing an early bounce.

The yen, typically bought during times of stress, rose to the day’s high versus the dollar around 106.26. MSCI’s allcountry equity index flatlined, and is now 6 per cent off January’s record highs, pressured by the trade war fears and the possibility that the Fed will tighten policy more than expected.

The US central bank has raised borrowing costs five times since late 2015. Markets are pricing in three rate increases this year, but some reckon policymakers might squeeze in a fourth, triggering a bond and equity sell-off.

Yesterday’s 1800 GMT announcement was expected to be the first under new Fed chair Jerome Powell.

“We might have significant changes in communication compared with what we’ve seen under [previous chair Janet] Yellen,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.

“The economic situation post-tax cuts also justifies a significant shift upwards in the dot plot,” he added.

AP ■ The New York Stock Exchange. Some markets gave back early gains ahead of the Fed’s first decision on interest rates since the appointment of its new chair, Jerome Powell.