U.S. STOCKS, BONDS
Blue chips surged more than 200 points after the Federal Reserve announced a much-anticipated plan to aid the U.S. economy.
Having a long-term investment horizon, remembering the blue chips, increasing your bond ownership as you get older, remaining patient and tuning out the daily market static won't guarantee that you'll achieve your investment goals, but you'll be off to a pretty good start.
The news sparked a similar rally in gold while rattling currency and fixed-income markets. The Dow Jones Industrial Average gained 206.51 points, or 1.55%, to 13539.86.
The Standard & Poor's 500-stock index gained 23.43 points, or 1.63%, to 1459.99, and the Nasdaq Composite gained 41.52 points, or 1.33%, to 3155.83. Shares of materials and financial companies rallied. All three major indexes reached multiyear highs.
The central bank will buy $40 billion of mortgage-backed securities a month, and is willing to take more action if the labor market doesn't improve, its policy-setting committee said.
The Fed also extended an existing stimulus effort known as Operation Twist, under which the central bank has been selling short-term bonds and using the proceeds to buy longer-term bonds in an effort to bring down long-term rates.
Officials also said they expect to keep short-term interest rates near zero until at least mid-2015, past the previous estimate of late 2014. The Fed's statement extended a rally that had started last week with the announcement of stimulus from the European Central Bank.
The Dow industrials are up 3.8% since that announcement. The bond-buying decision also whipsawed bond, commodity and foreign-exchange markets.
Confidence in the corporate credit markets jumped to its highest level since March 27 in the wake of the Fed's announcement. Markit's CDX North America Investment-Grade Index improved 5.1%, suggesting the cost to protect against corporate-bond defaults is at a five-month low.
In other economic news, reports on initial claims for jobless benefits in the latest week were higher than expected. The Producer Price Index for August, a measure of wholesale inflation, climbed 1.7% from July, more than the expected 1%. In corporate news, Apple rose $13.19, nearly 2%, to $682.98--another all-time closing high--after the unveiling of the iPhone 5.
EUROPEAN STOCKS, BONDS
Nervousness over the imminent conclusion of a two-day U.S. Federal Reserve policy meeting kept European investors in a cautious mood on Thursday, with banks weighing on the region's bourses. The Stoxx Europe 600 index fell 0.2% to close at 272.42, breaking a two-day winning streak.
On Wednesday, the index closed at its highest level since July 2011 after the German constitutional court refused to block ratification of the euro zone's permanent rescue fund, the European Stability Mechanism. EADS NV sank 10%, a day after the company and peer BAE Systems PLC confirmed they were in talks about a potential merger.
Shares of BAE rallied 11% on the news in late trade on Wednesday, but dropped 7.3% on Thursday. BAE was downgraded to sell from hold on Thursday by Societe Generale, which repeated that rating move for Italian defense group, Finmeccanica SpA, which tumbled 5.4%.
Analysts said shares of both companies have had a strong run and face risk from scheduled defense cuts in the U.S. French defense and media conglomerate Lagardere SCA, which owns 7.5% of EADS's equity capital, said it would look into "all the consequences" of a potential merger deal before consenting.
Lagardere shares fell 0.8%. In Italy, the government succeeded in selling 6.5 billion euros ($8.4 billion) at a debt sale, with solid demand and lower borrowing costs compared with a previous sale.
The FTSE MIB index, however, fell 1.1% to 16,244.28. Shares of UniCredit SpA fell 3%. Risk-sensitive sectors such as banks and miners weighed the most on European bourses. Spain's Banco Santander SA gave up 1.8% and BBVA SA lost 1.8%. The IBEX 35 index dropped 0.7% to 7,935.90.
In Germany, Commerzbank AG fell 1.8% and Deutsche Bank AG slipped 2.4%, weighing on the DAX 30 index, which closed 0.5% lower at 7,310.32.
In France, Credit Agricole SA gave up 2.6%, Societe Generale SA lost 3.3% and BNP Paribas SA fell 1.6%. Construction firm Vinci SA declined 3.6%, after Bank of America Merrill Lynch cut the stock to neutral from buy. France's CAC 40 index lost 1.2% to 3,502.09.
U.K.'s FTSE 100 index bucked the negative trend across Europe and closed 0.7% higher at 5,819.92, as Vodafone Group PLC climbed 1.9%. The wireless telecom firm's joint venture in the U.S., Verizon Wireless, said after the launch of Apple Inc.'s iPhone 5, that, it would offer the phone on its 4G LTE network from Sept. 21. Oil firms were also on the rise, as oil prices moved higher. BP PLC rose 0.9% and Royal Dutch Shell PLC gained 1.1%.
ASIA-PACIFIC STOCK MARKETS
Asian markets were mixed on Thursday, while the euro edged higher, ahead of the end of the Fderal Reserve meeting. Regional firms linked to Apple were also range-bound after the U.S. giant unveiled the iPhone 5 in California, with some analysts giving it a lukewarm response.
In Shanghai, dealers were cautious despite the cabinet saying Wednesday it would take various measures, including speeding up payment of tax rebates to exporters, to bolster flagging exports, the economy's key driver.
The market is also waiting for Beijing to announce monetary easing measures following several months of weak data on growth, trade, spending and investment.
Tokyo rose 0.39 percent, or 35.19 points, to 8,995.15, Seoul was flat, edging up 0.66 points to 1,950.69 and Sydney eased 0.50 percent, or 21.9 points, to 4,339.4. Hong Kong eased 0.14 percent, or 27.76 points, to 20,047.63 and Shanghai was off 0.76 percent, or 16.17 points, at 2,110.38.
Base metals closed little changed on the London Metal Exchange Thursday, held back by investor caution ahead of the Federal Reserve's much-anticipated policy announcement.
At the close, LME three-month copper was up 0.3% at $8,075 a metric ton. At the close, LME three-month tin was down 2.1% at $20,350/ton.
Crude-oil futures jumped Thursday to their highest level in four months, as traders considered the combined effect of new quantitative easing by the Federal Reserve and fresh turmoil in the Middle East.
Light, sweet crude for October delivery settled at $98.31 a barrel on the New York Mercantile Exchange, up $1.30 or 1.3%; that is the highest settlement price since May 4.
Brent crude on the ICE futures exchange settled at $116.90 a barrel, up 94 cents. Copper futures settled at a fresh four-month high Thursday as growth-sensitive assets rallied in response to the Federal Reserve's new bond-buying program and plans to extend low interest rates to 2015.
Copper for December delivery, the most active contract, rallied 1.75 cents, or 0.5%, to settle at $3.7100 a pound on the Comex division of the New York Mercantile Exchange.
The contract extended its gains to $3.7465 in electronic trading, after the Comex floor closed. Gold and silver climbed to six-month highs on Thursday, as the Federal Reserve's announced round of bond buying sparked a retreat in the U.S. dollar and demand for a hedge against potential inflation down the line.
Gold and other precious metals can gain from easy-money policies similar to the ones announced Thursday as investors seek a hedge against the inflation that can result.
Such policies by the Federal Reserve also can take a bite out of the dollar, drumming up demand for dollar-denominated gold. The most actively traded gold contract, for December delivery, rose $38.40, or 2.2%, to settle at $1,772.10 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest settlement since Feb. 28. Compiled from MORRISON SECURITIES PTY. LTD.
To contact the editor, e-mail:
Most Popular Slideshows
- Australia Bids Adieu to Adam Spencer's Mornings on ABC's "702 Breakfast" Show [PHOTOS]
- SEE PHOTOS! Eva Longoria Wears No Panties at Cannes 2013, Revealed in Embarrassing Wardrobe Malfunction [SLIDESHOW]
- Top 10 Hottest Celebrities with Shocking Weight Loss (And Find Out Their Secrets!) [PHOTOS]
- Demi Lovato Snapped Getting Flirty with The X-Factor Boss, Simon Cowell? [PHOTOS]