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Prudence, politics force Fed to begin shedding USA bonds

Prudence, politics force Fed to begin shedding USA bonds

US stocks looked set to open slightly lower on Thursday, a day after the Federal Reserve signaled it could raise interest rates for the third time this year despite low inflation and disclosed plans to shrink its balance sheet.

The Australian dollar fell 0.25 per cent to $0.8012.

The Standard & Poor's 500 index rose 1 point to 2,508.

Meanwhile, the yield on the two-year U.S. Treasury note, which tends to be more sensitive to market expectations for Fed policy, rose to its highest level since November 2008, settling at 1.442%, compared with 1.401% on Tuesday. This article is strictly for informational purposes only.

The CME Group's tracker of investor sentiment has put the likelihood of a rate hike by December at 56 percent.

"You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to (Fed chief) Janet" (Yellen), said Ken Polcari, director of the NYSE floor division at O'Neil Securities in NY. It tumbled 5.9% and Kellogg and Kraft Heinz both lost more than 1%.

Tokyo stocks ended slightly higher on Thursday as banks and exporters chalked up gains thanks to a weaker yen, but Toshiba retreated as it faced a court battle over the $18 billion sale of its prized memory chip business. The Fed now projects it will be 1.9 percent by the end of 2018, a touch below its earlier forecast of 2 percent.

Some traders had speculated the Fed led by Chair Janet Yellen may soften its stance on raising interest rates a third time in 2017 as inflation has been stuck below its 2 percent goal and amid signs of weaker business activity in the aftermath of two hurricanes that hammered two southern US states. The Philippine and Taiwanese central banks also make rates decisions later in the day.

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About 5.54 billion shares changed hands on USA exchanges on, compared with the 6.03 billion average for the last 20 sessions.

In other currencies, the euro continued to track lower against the dollar after falling steeply on the Fed's Wednesday announcement.

The greenback drifted 0.1 percent lower at 111.47 yen, below its eight-week peak of 111.87 set earlier on Tuesday.

Shares in Germany's ThyssenKrupp rose 3.6 percent after the company agreed with India's Tata Steel to merge their European steel operations to create the continent's No. 2 steelmaker. Yields rise as bond prices fall.

United States crude futures rose 2 cents to settle at US$49.91, while Brent crude futures fell 14 cents to US$55.48.

ASIA'S DAY: Japan's Nikkei 225 added 0.1 percent to 20,310.46 and South Korea's Kospi edged down 0.2 percent to 2,412.20.

ASIA'S DAY: Japan's benchmark Nikkei 225 added almost 2.0 percent to finish at 20,299.38, coming off a national holiday on Monday. Benchmark U.S. crude shed 51 cents to trade at $50.18 a barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, used to price worldwide oils, dropped 43 cents to $56.86 a barrel in London.

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