Thursday 22.37 BST
What you need to know
- Italian government pushes through budget plan
- US 10-year Treasury yields trade flat
- US stocks fall back from highs for the day
- Euro slips
US stocks faded in the New York afternoon on Thursday having rebounded strongly earlier in the day as investors digested the Federal Reserve’s message of continued gradual interest rate increases predicated on strength in the American economy.
The S&P 500 rose 0.3 per cent on the day, regaining ground after four straight sessions of declines. The Dow Jones Industrial Average climbed 0.2 per cent and the tech-heavy Nasdaq Composite moved 0.7 per cent higher.
Bond yields, which move inversely to price, also sank in the afternoon to trade flat, having fallen from their recent highs on Wednesday after expectations of a faster pace of interest rate increases, spurred by strong wage growth in August, failed to materialise.
The benchmark 10-year Treasury yield stood at 3.05 per cent.
“The market seems to be absorbing the rate hike, and potential for more rate hikes, easily,” said Quincy Krosby, chief market strategist at Prudential Financial.
In Europe, Italian bonds were volatile on Thursday, as investors and traders awaited news about the first budget from the country’s populist coalition government. At the eleventh hour the government forced through a plan that dramatically increases public spending, despite Italy already having one of the largest debt burdens in Europe.
Yields on Italian 10-year bonds, which have been trending lower for much of September, had earlier climbed after a report in the Corriere della Sera newspaper that the budget plan might be delayed.
The rise in yields eased but they remained higher on the day. Italy sold €5.25bn of bonds in an oversubscribed sale. The country’s auction for five-year bonds was 1.44 times oversubscribed, according to Reuters.
By late afternoon the yield on 10-year benchmark debt was up 3 basis points to 2.88 per cent, having risen to 2.99 per cent earlier in the day, its highest level in two weeks. The two-year yield rose 1bp to 0.75 per cent. Italy’s benchmark FTSE MIB dropped 0.6 per cent with financials and information technology stocks hit hardest.
European stocks trended upwards, with the Euro Stoxx 50 and FTSE 100 gaining 0.5 per cent, and Frankfurt’s Xetra Dax up 0.4 per cent.
In Asian equities, Japan’s Topix retreated 1.2 per cent after closing near an eight-month high in the previous session. The CSI 300, the benchmark for Chinese companies listed in Shenzhen and Shanghai, fell 0.4 per cent.
In forex markets, the euro continued to weaken, slipping 0.8 per cent to $1.1641, having strengthened earlier in the week following positive comments from European Central Bank president Mario Draghi on eurozone inflation.
“Markets are still digesting the Fed announcement and the more important thing currently is what Draghi has said about inflation and the new German inflation number,” said David Zahn, head of European fixed income at Franklin Templeton. “European bond markets seem to be leading global rates higher.”
The Japanese yen was 0.6 per cent weaker at ¥113.38. The pound weakened 0.7 per cent to $1.3079.
Oil prices resumed their upward momentum, but later flattened. Brent crude was up 0.5 per cent at $81.72 a barrel while West Texas Intermediate rose 0.9 per cent to $72.19 a barrel.
Gold weakened 1 per cent to $1,183 an ounce.
For market updates and comment follow us on Twitter @FTMarkets
Get alerts on Markets when a new story is published