The Fed Holds Interest Rates, Global Stock Markets Under Pressure

JAKARTA, KOMPAS.com — Global stock markets weakened on Wednesday. The pressure continued after the Federal Reserve held interest rates steady. Rising oil prices and US inflation data further burdened the markets. The US central bank signalled only one interest rate cut this year of 25 basis points. The year-end inflation projection rose to 2.7 per cent from 2.4 per cent in December. “Overall, investors got what they wanted. They got a patient Fed that acknowledges tensions in the Middle East could complicate an already uncertain environment, and they still project one rate cut this year even though inflation expectations have increased, at least based on the median projections,” said Anthony Saglimbene from Ameriprise Financial. “But really, this is about the tensions in the Middle East, when the Strait of Hormuz will reopen and what the risks are to oil supplies from Gulf countries. That’s what the market is focused on,” he added. The Dow Jones index fell 768.11 points or 1.63 per cent to 46,225.15. The S&P 500 dropped 91.33 points or 1.36 per cent to 6,624.76. The Nasdaq declined 327.11 points or 1.45 per cent to 22,152.42. Market pressure was reinforced by the surge in energy prices. US crude oil rose 0.11 per cent to $96.63 per barrel, or approximately Rp1.63 million. Brent rose 3.83 per cent to $107.38 per barrel, or approximately Rp1.81 million. The rise in Brent was triggered by an attack on the Pars gas field in Iran. This attack was the first against energy infrastructure in the Gulf since the US and Israel conflict against Iran. That escalation prompted Iran to warn neighbouring countries to evacuate energy facilities. US government efforts to ease supply pressures have not yet had a significant impact. The Donald Trump administration granted a 60-day exemption from the Jones Act to facilitate the distribution of fuel and fertiliser. The Producer Price Index surged 0.7 per cent in February. This figure was well above the expected 0.3 per cent and marked the highest increase since July. On an annual basis, the PPI rose 3.4 per cent from 2.9 per cent in January. Other data showed factory orders increased 0.1 per cent after a 0.4 per cent decline in December. The global MSCI stock index fell 0.89 per cent to 1,004.00. The European STOXX 600 index dropped 0.75 per cent. Market attention is now turning to policies from other central banks. The European Central Bank, Bank of England, and Swiss National Bank will announce decisions in the near future. The Reserve Bank of Australia raised interest rates first to 4.1 per cent. The increase was the second consecutive month in response to inflation risks due to the Iran war. The Bank of Canada held interest rates steady but opened the door to hikes if inflationary pressures persist.