LONDON (Reuters) – Global stocks are on track for their biggest drop in two weeks while oil prices held near six-month lows on Friday as a confident U.S. central bank and weak Chinese data hit demand for risky assets.

While the decision to hold interest rates by the U.S. Federal Reserve was anticipated by markets, some participants had expected a more cautious approach from the central bank after a stock market rout in October.

“That the Fed indicated an optimistic view on the economy despite the turbulence in stock markets in October suggests more rate hikes are in store and that is not positive for risky assets,” said Lefteris Farmakis, a strategist at UBS in London.

MSCI’s gauge of stocks across the globe .MIWD00000PUS fell half a percent, its biggest drop since Oct. 26, as the Fed indicated that another rate increase is likely in December. U.S. stock index futures ESc1 are down 0.5 percent.

Rick Rieder, co-manager of the BlackRock fixed income global opportunities fund, said likely greater tightening in financial conditions could start affecting other sectors of the U.S. economy such as autos and small businesses.

European stocks were a sea of red. MSCI’s main European index .MSER was down nearly 1 percent and the broader Euro STOXX 600 fell 0.7 percent.

Stocks in Hong Kong and China were the main losers in Asia, where a financial sector sub-index .CSI300FS fell more than two percent after China’s banking watchdog told lenders to allocate at least a third of new loans to private companies, raising the prospects of a jump in bad assets.

DOLLAR UP

A confident Fed also gave a boost to the dollar, which had weakened sharply after mid-term elections this week raised the prospects of U.S. political gridlock. Friday’s rise puts the greenback on track for a fourth consecutive week of gains.

The greenback gained a quarter of a percent against the euro EUR=EBS and half a percent against the British pound. GBP=D3

Further dollar gains can also pose headwinds for global risky assets as that translates into tightening global financial conditions as most emerging market economies borrow in dollars.

The dollar index measuring the currency against its six major rivals .DXY gained 0.25 percent to 96.86.

Losses in equities pressured bond yields lower, with safe-haven benchmark debt in Germany and the United States softening across the board, pressured by world trade frictions and a budget standoff between Italy and Brussels.

Oil prices fell to multi-month lows as global supply increased and investors worried about the impact on fuel demand from of lower economic growth and trade disputes.

Benchmark Brent LCOc1 crude oil fell to its lowest since early April, down more than 18 percent since reaching four-year highs at the beginning of October.

The sturdy dollar tarnished the appetite for safe-haven gold XAU=, with the price down 0.2 percent at $1221.42 an ounce.

Still, market watchers said appetite for equities is likely to remain firm unless there is a big sell-off in credit markets or a spike in volatility.

An ETF (HYG) tracking the performance of high-yield debt consolidated near three-week highs while gauges of volatility edged lower after a spike earlier this week.

“As long as these two indicators are not flashing red, stock markets should remain supported,” said Marc Ostwald, a global strategist at ADM Investor Services in London.

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