NEW YORK: Global equity markets were mixed on Thursday while the dollar surged to a three-week high and government bond yields rose, one day after the US Federal Reserve announced the end of its six-year bond-buying stimulus program.
The Fed, as expected, said it would no longer add to its holdings of Treasury bonds and mortgage-backed securities, effectively ending a program that at its peak pumped $85 billion a month into the financial system to hold interest rates down and boost the flagging economy.
Less expected was the Fed's expression of confidence in the US recovery, despite global growth concerns, which prompted financial markets to rethink the growing consensus that the Fed's first interest rate hike would be late in 2015.
The Fed did note in its statement Wednesday after a two-day meeting that overnight borrowing costs would remain near zero for a "considerable time." "The tone in the statement was relatively more hawkish than had been anticipated," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.
"The FX markets have concluded an interest rate hike is going to happen probably sooner rather than later." The dollar jumped 0.3 percent against a basket of six major currencies and rose 0.2 percent against the euro to $1.2602.
The two-year US bond yield on Wednesday posted its biggest one-day rise in almost four years. MSCI's index of equities in 45 countries fell 0.4 percent.
The pan-European FTSEurofirst 300 index of leading companies fell 0.2 percent in a volatile session.
The benchmark 10-year Treasury note yield rose 10/32 in price to yield 2.2835 percent.
The Dow Jones industrial average rose 64.19 points, or 0.38 percent, to 17,038.5, the S&P 500 lost 5.06 points, or 0.26 percent, to 1,977.24 and the Nasdaq Composite dropped 19.32 points, or 0.42 percent, to 4,529.90.
Visa Inc jumped 8 percent as the biggest boost to both the Dow and S&P 500 a day after it reported adjusted earnings that topped expectations, and said the mobile payment industry would be a "great driver" for business.
Gold fell to a three-week low just above $1,200 an ounce , pressured by the strong dollar.
Oil also fell, with US and Brent crude futures down more than 1 percent to $81.02 and $86.20 a barrel, respectively.
Brazil surprised markets late on Wednesday by hiking interest rates, a bold move that signals President Dilma Rousseff may make market-friendly policy changes after her narrow re-election victory on Sunday.
The rate hike could give the Brazilian real a further lift. It fell to a nine-year low against the dollar on Monday after Rousseff defeated market-friendly challenger Aecio Neves, but pared losses as some of the pessimism faded.
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