US MORNING REPORT (8am AEDT)
The US Federal Reserve has decided to reduce (´taper´) bond purchases by another $10 billion to $65 billion a month. The Fed noted ´´growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement.´´
In New Zealand, the Reserve Bank left the cash rate at 2.50%. There was a clear signal that cash rate increases are imminent: "In this environment, there is a need to return interest rates to more normal levels. The Bank expects to start this adjustment soon."
European shares fell on Wednesday, reversing the previous day´s gains, as investors again fretted about the health of emerging economies. The FTSEurofirst 300 index fell by 0.6% with the UK FTSE down by 0.4% while the German Dax lost 0.8%. But mining shares were higher in London trade with BHP Billiton shares up by 0.1% while Rio Tinto lifted by 1.1%.
US sharemarkets fell on Wednesday in response to disappointing earnings results and concerns about emerging economies. Shares in Boeing fell by 5.3% in response to earnings news. At the close of trade, the Dow Jones was lower by almost 190 points or 1.2%. The S&P 500 fell by 1.0% while the Nasdaq was down by 46 points or 1.1%.
US long-term treasury prices rose on Wenesday (yields lower) as jitters about the health of emerging economies drove investors to ´´safe haven´´ assets like bonds. US Treasury issued $15 billion in two-year floating rate notes and will issue $35 billion in five-year notes and $29 billion in seven-year debt on Thursday.US 2 year yields were steady at 0.355% while US 10 year yields fell 9 points to 2.686%.
Major currencies were mixed against the greenback in European and US trade on Wednesday. The Euro fell from highs near US$1.3685 to US$1.3600 but rebounded to US$1.3650 in afternoon US trade. The Aussie dollar eased from highs near US88.10c to lows near US87.25c, and was near US87.30c in afternoon US trade. And the Japanese yen lifted from103.35 yen per US dollar to JPY101.90 and was trading near JPY102.20 in afternoon US trade.
World oil prices rose modestly on Wednesday as investors digested the latest Federal Reserve decision and concerns about emerging nations. Brent crude rose by US44c or 0.4% to US$107.85 a barrel while US Nymex crude fell by US5c to US$97.36 a barrel.
Base metal prices fell between 0.3-1.1% on the London Metal Exchange on Wednesday. But tin bucked the trend, lifting by 0.3%. The gold price also rose as investors again embraced ´´safe-haven´´ assets. The Comex gold futures rose by US$11.40 or 0.9% to US$1,262.20 per ounce. The iron ore price fell by US$1.30 to US$122.60 a tonne.
Ahead: In Australia data on import and export prices and new home sales are released. In the US, the weekly jobless claims data is released together with pending home sales and the advance GDP (economic growth) reading.
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