Global stocks fall after Fed holds rates steady

Fri Sep 18, 2015 4:50pm EDT
 
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By David Gaffen and Richard Leong

NEW YORK (Reuters) - Stocks on major markets slipped on Friday and bond prices rose, pushing yields sharply lower, after the U.S. Federal Reserve on Thursday clung to its near-zero interest rate policy with global economic growth slowing.

Stocks and currencies in emerging markets, which are more vulnerable to higher U.S. interest rates, briefly welcomed the Fed's decision to postpone an interest rate rise, but their bounce faded with the persistent sell-off in developed markets.

Short-term lending rates, used as proxies for market expectations for the Fed's next move, shifted dramatically. December's fed funds futures contract rose to drop its rate to 21.5 basis points, implying only about a 44 percent chance of a rate increase by the end of the year.

"Investors are wrestling with how concerned they should be regarding global growth," said Jeremy Zirin, chief equity strategist at UBS Wealth Management in New York.

"The Fed has introduced a quasi-third mandate on global growth, apart from the labor market and inflation."

U.S. debt yields remained under downward pressure, with the U.S. Treasury two-year note's yield at 0.678 percent, a day after it hit a four-and-a-half-year high of 0.819 percent.

U.S. stock prices weakened, following other developed markets. The Dow Jones industrial average .DJI ended down 1.74 percent at 16,384.79, while the S&P 500 .SPX finished down 1.61 percent at 1,958.08 and the Nasdaq Composite .IXIC closed 1.36 percent lower at 4,827.23. [.N]

The FTSEuroFirst index of the top 300 European shares closed 1.9 percent lower at 1,397.57 points .FTEU3, its biggest fall in two weeks. [.EU]   Continued...

 
A trader on the floor of the New York Stock Exchange in New York September 17, 2015.  REUTERS/Lucas Jackson