By Chuck Mikolajczak
NEW YORK (Reuters) -Global shares declined on Thursday and were on pace for their biggest daily decline in three weeks, weighed down by large drops in megacaps Microsoft and Meta Platforms, while the dollar rose against the yen after policy announcements from the Federal Reserve and Bank of Japan.
Markets were also digesting comments from U.S. Federal Reserve Chair Jerome Powell on Wednesday, who dented expectations the central bank will proceed with another interest rate cut at its December meeting after reducing rates by 25 basis points in its policy announcement yesterday.
Investors showed a muted reaction to the deal U.S. President Donald Trump said he had agreed with President Xi Jinping to trim tariffs on China in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing, which markets had been anticipating in recent days.
On Wall Street, the S&P 500 was lower, as Meta Platforms plunged nearly 12% after reporting quarterly results after the close on Wednesday and Bloomberg reported on Thursday that the Facebook and Instagram parent was targeting at least $25 billion in a bond sale.
Also weighing on equities was a 2.5% decline in Microsoft following its quarterly earnings.
Those declines were offset somewhat by a 5% climb in Google parent Alphabet as its earnings beat expectations due in part to strong AI demand.
Fellow heavyweights Apple and Amazon are scheduled to report earnings after the U.S. market close on Thursday.
“Markets’ immediate reaction has been to see the FOMC meeting as hawkish – with simultaneous selling of bonds, gold, and equities,” said Matt King, founder of Satori Insights.
“This reaction is unsurprising.”
Markets are now pricing in a 72.8% chance of a 25 basis point cut at the Fed’s December meeting, down from more than 90% a week ago, according to CME’s FedWatch Tool.
The Dow Jones Industrial Average rose 221.26 points, or 0.46%, to 47,853.26, the S&P 500 fell 33.83 points, or 0.49%, to 6,856.76 and the Nasdaq Composite fell 245.25 points, or 1.02%, to 23,713.22.
MSCI’s gauge of stocks across the globe fell 5.98 points, or 0.59%, to 1,008.44 and was on track for its largest daily percentage drop since October 10, while the pan-European STOXX 600 index fell 0.38%.
European shares held at lower levels after the European Central Bank (ECB) kept interest rates unchanged at 2% for the third meeting in a row and offered no hints about future moves as it enjoys a rare period of low inflation and steady growth, despite trade turbulence.
In currencies, the dollar index, which measures the greenback against a basket of currencies, rose 0.28% to 99.42, with the euro down 0.15% at $1.1582.
Against the yen, the dollar strengthened 0.94% to 154.13 with the Japanese currency weakening after the Bank of Japan (BOJ) kept interest rates steady, as investors were expecting a more hawkish tone from Governor Kazuo Ueda, even as he sent the strongest signal yet that a rate hike was possible as soon as December.
The yield on benchmark U.S. 10-year notes rose 2.7 basis points (bps) to 4.085% after jumping 7.5 bps on Wednesday following Powell’s comments, its biggest daily climb since July 11.
The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, advanced 2.8 basis points to 3.614% after a 9.2 bp increase on Wednesday, its biggest since July 3.
U.S. crude fell 0.56% to $60.14 a barrel and Brent fell to $64.54 per barrel, down 0.59% on the day as investors assessed the trade deal between the U.S. and China.
(Reporting by Chuck Mikolajczak; Additional reporting by Pranav Kashyap and Nikhil Sharma in Bengaluru, Amanda Cooper in London and Gregor Stuart Hunter in Singapore; Editing by Ros Russell and Nick Zieminski)
