LONDON – Stock markets diverged Wednesday and the dollar firmed against most rivals ahead of an expected interest rate hike from the US Federal Reserve.
As the euphoria over the historic summit between US President Donald Trump and North Korea leader Kim Jong Un recedes, investors are focusing on macroeconomic issues with concerns over global trade causing some discomfort.
“With a rate hike widely expected, investors are focused on the Fed’s statement wording, economic projections and press conference for clarification on the future pace of interest rate hikes,” said Jo Horton, a senior economist at St. George Bank in Sydney.
Speculation about further increases was fuelled by data Tuesday showing US inflation at a six-year high in May.
And Greg McKenna, chief market strategist at AxiTrader said: “With oil up, wage pressures apparently building, and the US economy bouncing back strongly in the second quarter, the (Fed) is likely to be fairly forthright in their ascertainment that rates will need to continue to be increased – however gradually.”
The dollar continues to enjoy support against most other currencies ahead of the Fed decision, with the pound hamstrung by British Prime Minister Theresa May’s Brexit struggles after she made some big compromises to push through key legislation.
But the euro was up against the greenback ahead of the European Central Bank’s own policy meeting on Thursday, as it seeks to wind in its crisis-era stimulus.
On equity markets, Hong Kong’s main index dropped 1.2 percent with shares in Chinese telecoms equipment maker ZTE collapsing more than 40 percent as it resumed trading after agreeing to pay a massive fine over its handling of a US sanctions violation.
The firm suspended trading in April after Washington said it