* Fed to hold rates near zero long after economy strengthens
* Yellen remarks hint rate hikes sooner than expected
* Gold falls as dollar gains after Fed statement
(Updates with U.S. markets close)
By Angela Moon
NEW YORK, March 19 Global equity markets ended
lower on Wednesday while yields on U.S. Treasuries jumped after
comments by U.S. Federal Reserve Chair Janet Yellen raised the
possibility that interest rates could rise soon than has been
Yellen, speaking at her first press conference as the Fed
chief after the close of the U.S. central bank's two-day policy
meeting, said the Fed could start to raise interest rates around
six months after its current asset purchase program ends.
Yellen said the bond purchases would probably end in the
fall; a rate reduction six months later would move up the
timetable for the Fed's first hike, which many market
participants had been expecting in the second half of 2015.
"She certainly moved it up a little bit and I don't think
the market was expecting that at all because she is widely
viewed as being more on the dovish side of the aisle than she is
on the hawkish side," said Peter Kenny, chief executive officer
of Clearpool Group in New York.
"That is not a particularly hawkish comment, but the fact of
the matter is it was not expected."
Fears that the Fed's policy-setting Federal Open Market
Committee might move away from its near-zero rate policy sooner
than some traders had previously thought unleashed a wave of
selling in the bond market. Short-dated and intermediate
Treasuries suffered the biggest losses since they are seen as
the most vulnerable to a swifter change in Fed policy.
Benchmark 10-year Treasuries notes last traded
26/32 lower in price to yield 2.773 percent, up 9 basis points
from late on Tuesday.
The five-year note suffered the heaviest losses
among all maturities. It tumbled 25/32 in price with its yield
surging 16 basis points, the largest one-day rise since July
2013, to 1.712 percent.
The dollar index gained 0.8 percent 80.056. Gold
fell 1.8 percent to $1,330.61 an ounce, its biggest
one-day fall since Jan. 30. Gold has lost nearly 4 percent in
the metal's biggest three-day drop since Dec. 19.
"Gold's appeal as an inflation hedge is not as strong after
the Fed's moves. It was already down on the reduction in
geopolitical risk, so the combination of the two is pretty
powerful," said James Steel, chief precious metals analyst at
WALL ST SPOOKED
U.S. stocks sank in a late afternoon selloff that sent major
indexes down more than 1 percent, but managed to finish off
their session lows.
The Dow Jones industrial average fell 114.02 points,
or 0.7 percent, to 16,222.17, the S&P 500 lost 11.48
points, or 0.61 percent, to 1,860.77, and the Nasdaq Composite
dropped 25.711 points, or 0.59 percent, to 4,307.602.
Equities had rallied at the start the week, buoyed by easing
geopolitical concerns, though trading volume has been light. The
S&P 500 climbed 1.7 percent over Monday and Tuesday, its
best back-to-back performance since early February.
The MSCI world equity index which tracks
shares in 45 countries, fell 0.4 percent.
European markets closed ahead of the Fed's policy statement
and Yellen's press conference. The FTSEurofirst 300
edged down 0.07 percent, at 1,305.14 points, while the euro
zone's blue-chip Euro STOXX 50 index was up 0.08
percent at 3,076.36 points.
Brent oil futures fell as worries over sanctions affecting
Russian oil supplies eased, while U.S. crude oil rose on an
inventory draw at the benchmark's pricing hub and ahead of the
front month contract's expiration.
Brent settled 94 cents lower at $105.85 per barrel
after falling by $1.08 to an intra-day low of $105.71 per
barrel, the lowest since Feb. 5.
(Editing by Leslie Adler)