(Updates with U.S. market action, changes byline, dateline from
previous LONDON)
* Euro and sterling fall to 2-1/2 year lows
* Fed cuts rates by 25 basis points, further cuts uncertain
* Banks lead European stocks higher
* Emerging-market stocks on track for 7th session of losses
* Gold and industrial metals melt lower
By Rodrigo Campos
NEW YORK, Aug 1 (Reuters) - The dollar charged to its
highest in more than two years on Thursday, trampling almost
every market in its way, after the Federal Reserve dampened
hopes for a lengthy run of U.S. interest rate cuts.
After the Fed lowered its benchmark rate by 25 basis points,
Chairman Jerome Powell said that the central bank's first rate
cut in over a decade was "not the beginning of a long series of
rate cuts." Markets were expecting a more dovish stance from the Fed and
the dollar's reaction said it all. The dollar index .DXY
surged to its highest in more than two years, euro/dollar
dropped below $1.11 for the first time since May 2017, and
Brexit-hobbled sterling hit 30-month lows just above $1.21
GBP= . /FRX
Stocks in Asia suffered the most from the dollar's strength,
with China's main indexes down 0.8% and Japan's Nikkei up under
0.1%.
By the time stocks opened on Wall Street, the dollar's 0.4%
overnight gain had been cut in half and tech shares lead a rally
though it didn't fully make up for Wednesday's losses.
"It was always going to be a tough job for the Fed to be as
dovish as stock markets hoped," said Chris Beauchamp, chief
market analyst at IG, in a note.
The Dow Jones Industrial Average .DJI rose 289.74 points,
or 1.08%, to 27,154.01, the S&P 500 .SPX gained 31.77 points,
or 1.07%, to 3,012.15 and the Nasdaq Composite .IXIC added
129.71 points, or 1.59%, to 8,305.13.
The pan-European STOXX 600 index .STOXX rose 0.41% with
support from bank shares. MSCI's gauge of stocks across the
globe .MIWD00000PUS gained 0.47%.
Emerging market stocks lost 0.57%, on track for a seventh
straight session of losses. After dropping 1.7% in July, the
index is up 6.7% so far in 2019.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS closed 0.62% lower, while Japan's Nikkei .N225
rose 0.09%.
In sovereign debt markets, U.S. Treasury yields fell further
after an industry report suggested domestic manufacturing growth
slowed to its weakest pace in nearly three years last month.
Earlier, data showed manufacturing activity in the euro zone
fell at its steepest rate since late 2012 last month, figures
showed. ECUR/PMIM
Benchmark 10-year notes US10YT=RR last rose 18/32 in price
to yield 1.9606%, from 2.021% late on Wednesday.
The dollar strength notwithstanding, both the euro and the
pound were gripped by their own issues. Fears of a no-deal
Brexit under Prime Minister Boris Johnson continue to afflict
the pound, while the weak data and central bank outlook kept
downward pressure on the euro.
"Financial stability is not the same as market stability. In
the event of no-deal, no transition Brexit, sterling would
likely fall, the risk premiums on UK assets would rise and
volatility would spike higher," said Mark Carney, the head of
the Bank of England.
The dollar index .DXY rose 0.08%, with the euro EUR=
down 0.13% to $1.106.
Sterling GBP= was last trading at $1.2138, down 0.16% on
the day.
The Japanese yen strengthened 0.44% versus the greenback at
108.30 per dollar.
The dollar strength and rising U.S. supply sent oil prices
sharply lower after a string of gains, while other
dollar-denominated commodities also fell. The CRB commodity
index .TRCCRB fell 1.5%.
U.S. crude CLc1 fell 3.11% to $56.76 per barrel and Brent
LCOc1 was last at $63.42, down 2.51% on the day.
U.S. gold futures GCc1 fell 0.65% to $1,416.90 an ounce.
Copper CMCU3 lost 0.33% to $5,907.50 a tonne.
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Pound has taken a pounding this year https://tmsnrt.rs/2MzIqTp
Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
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