Global shares eked out slim gains on Thursday as strong earnings in the semiconductor sector were overshadowed by news that the Federal Reserve would continue on its path of raising rates to quell inflation, but by taking smaller steps.
the pace of rate hikes, minutes of the U.S. central bank's last policy meeting showed on Wednesday, but it also indicated that curbing unacceptably high inflation would be the "key factor" in how much further rates need to rise.in stocks has succumbed to a realisation that the Fed will continue to increase interest rates to cool the economy and tame inflation.
This has pushed safe-haven bond yields higher, making risky stocks less attractive, with the Fed's next meeting nearly a month away on March 22.Eren Osman, managing director of wealth management at Arbuthnot Latham & Co, said bond yields were starting to price in a higher terminal rate of 5.5% rather than 5.25% for the Fed.
"From the minutes of the Fed, I take out of it a bonus that they appear to be more balanced in their inflation outlook, they recognise risks to the economy are skewed to the downside," Osman said. "The idea that we see rate cuts later in the year are quite rightly being discounted to a greater extent," Osman said. "In the absence of a clear reversal in the current easing of inflation, we feel comfortable that yields have kind of topped out within this cycle."scenario where global economic growth is resilient and inflation stays higher for longer, leading investors to dial back appetite for risk assets and government debt.
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