The Federal Reserve approved a rare half-percentage-point interest rate increase and announced plans to shrink its $9 trillion asset portfolio starting next month in a double-barreled effort to reduce inflation that is running at a four-decade high. The moves, announced after a two-day policy meeting Wednesday, will raise the central bank’s benchmark federal-funds rate to a target range between 0.75% and 1%. Together, the steps mark the most aggressive Fed tightening of monetary policy at one meeting in decades, aimed at rapidly reducing the economic stimulus that has contributed to rising price pressures. The Fed, which usually lifts interest rates in quarter-percentage-point increments, last raised rates by a half point in 2000. The rate-setting Federal Open Market Committee approved the decision unanimously. In a statement, the committee said it “anticipates that ongoing increases in the target range will be appropriate,” setting the stage for another large rate rise at the Fed’s meeting next month. Fed officials also finalized plans to start shrinking their mammoth holdings of Treasury and mortgage securities passively - that is, by allowing bonds to mature without reinvesting the proceeds into new securities rather than by selling them in the open market.

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The Swiss stock market lost ground on Wednesday. The SMI declined by 1 per cent to 11,880 points. Among the 20 SMI stocks, there were 13 price losers and six price winners, and one share closed unchanged. 31.02 (previously: 39.09) million shares were traded. The shares of the building materials group Holcim rose by 0.9 per cent. At the annual general meeting, all motions were waved through - including the dividend proposal of CHF 2.20 per share. After the presentation of what at first glance appeared to be positive business figures from the sanitary supplier Geberit, the share price fell by 2.3 per cent. The increasingly gloomy economic outlook in China once again weighed on luxury goods stocks Richemont (-2.6%) and Swatch (-2.5%). Novartis (-0.6%) received another approval for the cell therapy Kymriah in the EU, but the headline did not help the share price. With Roche (-2.1%) and Nestle (-1.1%), other defensive stocks also slipped. Among the second-line stocks, Mobimo fell by 0.5 per cent. The real estate group had sold the unsubscribed shares on the market following the successful rights offering.

European stocks edged lower Wednesday. The Stoxx Europe index closed down 1.1% at 441.4 points. In Paris, the CAC 40 and the SBF 120 lost 1.2% and 1.1% respectively. In Frankfurt, the DAX 40 lost 0.5% and in London, the FTSE 100 dropped 0.9%. Solvay gained 5.8%, one of the strongest gains in the SBF 120 index. The chemical company raised its underlying gross operating profit (Ebitda) target for 2022 and presented results well above analysts' expectations for the first quarter. Maisons du Monde (+4.2%) confirmed its financial targets for 2022, despite a decline in sales in the first quarter. Vallourec (+2.2%) announced that it has partially restarted operations at the Pau Branco iron ore mine in Brazil, following an agreement with the mining authorities for a three-month period. EDF lost 2.5%. The energy group recorded a strong increase in turnover in the first quarter, fuelled by high electricity and gas prices, but recalled that this performance would have only a "limited" impact on its gross operating surplus (Ebitda) in 2022, due in particular to the fall in its production. Ubisoft jumped 8.9% as press reports suggest that the Guillemot founding family may join forces with private equity funds to acquire the company. Universal Music Group (+1.3% in Amsterdam) reported stronger than expected organic sales growth in the first quarter. Volkswagen (-1%, in Frankfurt) on Wednesday confirmed its projections for fiscal 2022, despite supply difficulties and a difficult geopolitical environment.

U.S. stocks rallied, scoring their biggest one-day gain since 2020, after Federal Reserve Chairman Jerome Powell put to rest investors’ fears that the central bank might be considering bigger interest-rate increases in the coming months. Stocks soared after Mr. Powell’s remarks, with the Dow Jones Industrial Average finishing up 932.27 points, or 2.8%, to 34061.06, marking its biggest one-day gain since November 2020. The S&P 500 jumped 124.69 points, or 3%, to 4300.17 for its best day since May 2020, while the Nasdaq Composite added 401.10 points, or 3.2%, to 12964.86. Stocks rose across the board, with all 11 sectors of the S&P 500 finishing higher. Exxon Mobil and Chevron rose more than 3% apiece, boosted by a rally in oil prices. Meanwhile, technology and consumer-discretionary shares, which had been among the market’s biggest decliners earlier Wednesday, flew higher. The groups had taken a hit earlier as investors facing higher interest rates shied away from companies with higher valuations. It staged a rebound alongside bond prices, though, after Mr. Powell’s comments. Alphabet rose 3.8%, and Facebook parent Meta Platforms rose 5.4%. Corporate earnings also spurred volatility in the market Wednesday. Airbnb shares rose $11.18, or 7.7%, to $156.18 after the company said it expects to post its first full-year net profit this year. Starbucks added $7.31, or 9.8%, to $81.64 after the coffee chain said profit and sales grew in the most recent quarter.

In Asia, major indexes broadly closed with gains. Trading in Japan is suspended for the holiday and the stock market in South Korea is also closed. In Hong Kong, the Hang Seng Index rose by 0.7 per cent. The index is supported by technology stocks. Alibaba advanced by 1.9 per cent and JD.com by 2.3 per cent. The Shanghai composite gains 1.1 per cent after a three-day trading pause. The Caixin services purchasing managers' index fell to its lowest level in April since the pandemic began in February 2020, and among individual stocks, Hangzhou HIK Vision buckles 10 per cent. The US is reportedly seeking sanctions against the surveillance technology company. CATL loses 6.0 per cent after its net profit fell 24 per cent in the first quarter.

Long-dated U.S. government debt yields slipped on Wednesday. The yield on the 10-year US Treasury security fell by 4 basis points to 2.919%, whereas it had exceeded the 3% threshold during the session. The 2-year rate, which is very sensitive to the Fed's short-term rate expectations, plunged 15 basis points to 2.616%. Policy makers also revealed they won’t begin shrinking their almost $9 trillion balance sheet until June. Stock investors cheered the developments, even though Powell said more 50 basis point hikes like Wednesday’s are on the table.

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