World stock indexes soared to record highs on Thursday while the dollar traded close to a one-month low after the Federal Reserve hiked U. S. interest rates but signaled no pick-up in the pace of tightening. European and Asian were broadly higher this morning, with S&P tagging along, driven by two main events: the latest “dovish” Fed rate hike, and the Dutch election results, in which Geert Wilders performed worse than some expected, reducing concerns of Eurozone political risk, and broadly seen as a sign of support for Europe’s establishment.
As a result, the MSCI world equity index which tracks shares in 46 countries, jumped 0.7% on the day to reach an all-time high, as yields on 10-year U. S. Treasuries tumbled the most since last August.
“It was a well-prepared hike, and when you consider the fact that Yellen and Co kept the outlook for growth and inflation largely unchanged, I would call this a dovish hike,” said DZ Bank analyst Rene Albrecht, in Frankfurt.
A quick recap of the Fed’s announcement, starting with the dots, where the median 2017 and 2018 dots were left unchanged at 1.375% and 2.125% respectively. The longer term dot was also left unchanged at 3% while the only shift was the small increase in the median 2019 dot to 3% from 2.875%. However it is worth highlighting some of the finer details of the moves in the dots. Four of the seven below-median dots for 2018 have now moved up to the median. For 2017, previously six members expected less than 3 hikes and now only three members expect such. Five members still expect more than 3 hikes which means that the number of members expecting 3 hikes has increased from six to nine. So this suggests a stronger consensus view this year.
This post was published at Zero Hedge on Mar 16, 2017.
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