Investment Daily: US stocks fell, as Treasury yields rallied after Fed policy decision

18 June 2026

US stocks fell on Wednesday amid investor worries over a possible rate hike by the Fed this year. The S&P 500 lost 1.2%.

US Treasuries fell and the yield curve flattened, after the Fed held rates but the dot plot signalled a hawkish shift, driving market repricing of near-term tightening risk. 2-year yields jumped 13bp to 4.18% as 10-year yields rose 5bp to 4.49%.

European stocks were mixed on Wednesday as investors awaited the Fed policy decision. The Euro Stoxx 50 gained 0.7%. The German DAX was up 0.1% and the French CAC closed 0.2% lower. In the UK, the FTSE 100 edged 0.1% higher.

Eurozone government bonds closed little changed. 10-year German and French bond yields both ended flat at 2.93% and 3.66%, respectively. In the UK, 10-year gilt yields fell 4bp to 4.75%.

Asian stock markets traded mixed but mostly higher on Wednesday, ahead of the Fed policy decision and Chair Warsh’s post-meeting press conference, with lower oil prices supporting market sentiment. Japan’s Nikkei 225 advanced 0.7%, while Korea’s Kospi ended 1.6% higher. China’s Shanghai Composite added 0.4%, whereas Hong Kong’s Hang Seng fell 0.7% on weakness in financials and real estate shares. Elsewhere, India’s Sensex rose 0.5%.

Crude oil prices ended Wednesday’s session slightly higher, with WTI for July delivery settling 1.0% higher at USD76.8 a barrel. However, oil futures retreated this morning as an interim US-Iran peace deal went into effect.

The Bank of Japan (BoJ) raised its policy rate by 25bp to 1.00%, as widely expected, and decided to halt the reduction in JGB purchases from April 2027. The BoJ highlighted the risk of underlying CPI inflation deviating upward above 2%.

The Reserve Bank of Australia (RBA) kept its policy rate unchanged at 4.35%, as widely anticipated. Governor Bullock noted upside risks to inflation and did not rule out further tightening.

In China, May activity indicators continued to reflect a two-speed economy. Industrial production showed resilience, up 4.5% YOY, driven mainly by gains in high-tech manufacturing and new energy sectors thanks to robust exports. However, non-tech domestic demand was softer than expected as the property sector remained under pressure. Retail sales fell 0.6% YOY, partly reflecting an unfavourable base effect from last year’s trade-in subsidies. Fixed asset investment contracted by 4.1% YOY in the first five months, despite strong advanced manufacturing investment.

Bank Indonesia will likely stay vigilant on FX and inflation stability risks amid balance of payment pressures, though lower oil prices offer some reprieve.

The Philippines’ central bank may tighten policy further, as headline inflation has eased but remains well above the central bank’s target range.

The Bank of England looks set to leave its policy rate unchanged at 3.75%, but Megan Greene may join Huw Pill in supporting an immediate rate hike.