Equities retreat as Federal Reserve maintains tightening policy steady

The third quarter-point rate increase by the Federal Reserve as the world’s largest central bank indicated it plans to continue further monetary tightening through 2020 damped the upside momentum of global equities last week. The SP 500 ended 0.5% lower last week as the Fed raised federal funds rate to 2% - 2.25% range. Central bank officials’ projections indicated they plan one more rate hike in December, three in 2019 and one in 2020.

The Nasdaq 100 index was the best performer among the major stock market indices last week rising 1.28%. Among major currency pairs the US dollar vs Swiss franc was the top performer: it rallied 1.8%. Meanwhile the euro slumped 1.3% against the dollar on a looming conflict between Italy’s coalition government and European Union on Italy’s budget plan of 2.4% deficit of gross domestic product for next year, triple what the previous government had planned.

The US - Canada deal on Sunday, which rescued the NAFTA as a trilateral trade pact with Mexico, US and Canada, will ease global trade war concerns and boost investors risk appetite this week. The Reserve Bank of Australia meets on Tuesday, the central bank is expected to leave rates steady at 0.5%. Among other major event the US non-farm payroll report will be released on Friday. The labor market is anticipated to remain strong with the unemployment rate forecast to edge lower to 3.8% from 3.9%.