Shares plummet on Fed’s rate call

SHARES around the world tumbled yesterday in the wake of the Federal Reserve’s decision to leave interest rates in the United States on hold.

The American central bank pegged rates at between zero and 0.25pc on Thursday night after one of the most anticipated meetings in its history.

But the move was met with dismay by investors who now face yet more uncertainty over when the Fed will finally act. The downbeat assessment of the world economy by Fed chairman Janet Yellen also spooked the markets.

Guy Dunham, a fund manager at Baring Asset Management, said the markets would have ‘preferred certainty to uncertainty and just wanted clarity on the precise timing’ of the change in interest rates.

The Fed has not raised interest rates for nearly a decade and speculation over the timing of the first move – as well as the slowdown in China – have dogged financial markets for weeks.

The FTSE 100 index fell 82.88 points or 1.3pc in London following losses of nearly 2pc in Tokyo overnight when Japan’s Nikkei was hit by heavy selling.

The losses were echoed across Europe with Frankfurt down 3.1pc and Milan off 2.7pc, while Paris and Madrid fell 2.6pc.

On Wall Street, the Dow Jones Industrial Average was more than 100 points down in early trading having shed 65 points on Thursday night following the Fed’s decision.

Rick Rieder, managing director at BlackRock, said: ‘We think the Fed risks missing its window of opportunity for rate normalisation if it waits for ideal conditions that realistically never seem to arrive.’

Tony Cross, an analyst at online trading firm Trustnet Direct, said: ‘Equity markets on both sides of the Atlantic have been left bruised by the Fed’s ongoing can-kicking over the elephant in the room that is interest rates. Those hoping that the Fed’s decision to push back the inevitable rate hike news would give equity markets a degree of support have been left disappointed.’