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Stocks gain, dollar down as Fed sees gradual tightening

Stocks gain, dollar down as Fed sees gradual tightening

Trading in stock markets is cautious and the dollar is slightly weaker as investors look ahead to an expected interest rate increase by the Federal Reserve.

At 3:13 p.m., the Dow Jones Industrial Average was down 34.93 points, or 0.17 percent, to 20,915.17, the S&P 500 had lost 5.85 points, or 0.25 percent, to 2,379.41, and the Nasdaq Composite had dropped 5.46 points, or 0.09 percent, to 5,894.59.

While the Fed raised interest rates by 25 basis points on Wednesday, it kept to its original forecast of three rate hikes this year, disappointing investors who were expecting four. Yields hit a session high of 3.156 percent in afternoon U.S. Trading.

The normalisation of Fed monetary policy also pushed some emerging market central banks to follow suit: China's central bank increased short-term interest rates for the third time this year in a move seen aimed at curbing capital outflows and supporting the yuan.

"It was a well-prepared hike, and when you consider the fact that Yellen and Co kept the outlook for growth and inflation largely unchanged, I would call this a dovish hike", said DZ Bank analyst Rene Albrecht, in Frankfurt.

Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares (GLD), fell 0.28% on Thursday, the first outflow this week. The Australian dollar stood at $0.7676, having gained 2 percent on Wednesday trading in NY.

The central bank yesterday raised rates by a quarter point to 0.75-1.00 per cent, nodding to the continued strength in the labour market and a pickup in inflation.

Dutch Prime Minister Mark Rutte's party won a parliamentary election victory over anti-Islam lawmaker Geert Wilders.

Oracle surged to a record high of $46.99 and was last up 6.7 percent at $45.93 after the business software maker issued a better-than-expected quarterly profit.

Gold rose $2.90 to $1,230.00 per ounce. Meanwhile, Sydney's S&P-ASX 200 rose 0.2%.

But a softening of the joint draft statement's language on trade, removing a rejection of protectionism, speaks to a promised rise in USA tariff barriers which has so far largely been seen as dollar-positive.

Oil prices rebounded after the International Energy Agency said in its latest monthly report that OPEC crude producing nations were complying with a landmark deal to curb a global supply glut. It was fractionally higher at $1.07715 in early trade, after two days of strong gains, and set to end the week up 0.9 percent.

Oil prices slipped as support from a weaker dollar was offset by USA crude inventories near record high levels. The dollar slipped to 113.02 Japanese yen from 113.26 yen.

CURRENCIES: The euro from dipped to $1.0746 from $1.0749 late Thursday, and the British pound fell to $1.2367 from $1.2358.

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