Shares tick higher as Fed hikes rates, dollar jumps with short-term yields

Sydney, September 17: Stocks rose slightly on Thursday as traders anticipated the Federal Reserve's first increase in interest rates in over three years, helping to calm a global bond market selloff. The U.S. dollar surged to a seven-week high against its counterparts as Treasury yields jumped, indicating the market's belief that the Fed may need to raise rates again by December.

This news was a setback for commodities, particularly oil prices, which retreated from their recent highs. The Bank of England is expected to keep interest rates unchanged later in the day, while the Bank of Japan is anticipated to raise rates on Friday. U.S. equities showed gains, with the MSCI's Asia-Pacific index up 0.4% and the Nikkei in Japan up 0.5%.

However, Chinese blue-chips and Hong Kong's Hang Seng slipped by 0.4% and 0.9% respectively. The Federal Reserve's decision was unanimous, with the board indicating they plan to raise rates a further quarter point this year. Analysts now expect the Fed to hike rates again in October, with a 50% chance of an additional hike in November.

This hike was seen as necessary to bring inflation back to the Fed's 2% target. While the short-term Treasury yield curve has flattened, the long end of the curve remained relatively stable. However, commodity markets are suffering, with oil prices declining and gold showing resilience despite a global downgrade.