While you were sleeping: Dollar gains on Fed

While you were sleeping: Dollar gains on Fed

July 28 (BusinessDesk) - The US dollar climbed, while Wall Street reversed earlier losses, after Federal Reserve policy makers signalled that interest rates might rise this year.

The Fed kept its key rate unchanged but was more optimistic about the economy.

“Near-term risks to the economic outlook have diminished,” the Federal Open Market Committee said in a statement after its two-day meeting. “The labour market strengthened and ... economic activity has been expanding at a moderate rate” since the June meeting.

The greenback strengthened against the euro and the yen.

“It sounds like the Federal Open Market Committee is setting the stage for another rate hike in the coming months, and that is good for the dollar given the recent issues in Europe and the UK,” Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, told Bloomberg.

Wall Street recovered from earlier declines after the Fed’s statement. In 3.08pm trading in New York, the Dow Jones Industrial Average rose 0.2 percent, while the Nasdaq Composite Index climbed 0.7 percent. In 2.54pm trading, the Standard & Poor’s 500 Index was 0.04 percent lower.

The Dow rose as gains in shares of Apple and those of Caterpillar, recently up 7.2 percent and 1.3 percent respectively, outweighed slides in shares of Coca-Cola and those of McDonald’s, down 3.4 percent and 1.7 percent respectively.

Apple shares rallied after the company reported a drop in revenue that was smaller than expected, bolstered by better-than-expected sales for a cheaper iPhone SE model.

“Good things happen when people expect nothing,” Amit Daryanani, an analyst at RBC Capital Markets who estimates that the SE accounted for 23 percent of total iPhone sales, told Bloomberg. “The numbers aren’t getting any worse and we’re getting into a new iPhone cycle soon." A new flagship model should improve the company’s financial performance, he added.

Coca-Cola shares dropped after the soft drink company posted quarterly revenue that fell short of analysts’ expectations because of declining sales overseas including in China and Argentina and downgraded its full-year so-called organic revenue estimate.

"Strong performance in some of our largest and most developed markets, including the United States, Mexico and Japan, was offset by difficult external conditions in many of our emerging and developing markets, including China and Argentina," Chief Executive Officer Muhtar Kent said in a statement.

"These factors combined to put pressure on our volume and top-line performance in the quarter, especially where we own bottling businesses," Kent said.

Europe’s Stoxx 600 Index ended the day with a gain of 0.4 percent from the previous close, bolstered by better-than-expected corporate results including from LVMH Moet Hennessy Louis Vuitton. The UK’s FTSE 100 index added 0.4 percent, Germany’s DAX index gained 0.7 percent and France’s CAC 40 index climbed 1.2 percent.

(BusinessDesk)

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