US markets rose sharply on Tuesday ahead of the Federal Reserve’s two day policy meeting statement on Wednesday. The S&P 500 added 23.42 points, or 1.2%, to 1,985.05. Broad-based gains were led by the energy and industrials sectors, which recovered some of the steep losses from Monday. The Nasdaq Composite rose 78.36 points, or 1.8%, to 4,564.29. The Dow Jones Industrial Average jumped 187.8 points, or 1.1%, to 17,005.75, closing above the 17,000 level for the first time since October 3. Investors are clearly expecting that the Fed will not adopt a hawkish stance on tightening the monetary policy and will likely reinforce its stated willingness to wait longer before raising interest rates. In its previous statement the Fed had indicated the rates will remain low for a “considerable time”, and the market consensus was the rates would not be hiked before mid 2015. The Fed forecasts have estimated the US economy will grow around 3 percent this year with inflation rising gradually to Fed’s target level of 2 percent. But slower than expected global growth presents a challenge for US economic recovery, as indicated by recent economic data. As Commerce Department reported yesterday, the demand for US made capital goods excluding aircraft fell 1.7 % in September against an expected increase of 0.6%, second month in row. It is the biggest drop in eight months. A second report indicated US home prices grew by less than forecast in August, according to S&P/Case-Shiller’s 20-city composite index. A third report by Conference Board said the index of consumer attitudes increased to 94.5 in October, the highest reading in seven years. Investors clearly discounted poor economic reports by focusing on improved consumer optimism and confidence in the short-term outlook for the economy. The weak capital goods orders and house price data indicate a slowdown in activity, further indication of unsteady US recovery. As a result of slower than expected global growth and slower US recovery investors have recently pushed their expectation for an initial interest rate hike back to next year, although some top Fed officials recently said they think the US Central Bank is still on track to bump up borrowing costs in mid 2015. Investors will be reading closely the statement the Fed will issue at 19:00 CET to see whether it continues to refer to “significant” slack in the US labor market and whether it retains language indicating rates will remain low for a “considerable time” as widely expected. European stocks rebounded on Tuesday after yesterday’s losses as better-than-expected results from a number of blue-chips including pharmaceutical group Novartis and bank UBS helped lift sentiment. The German DAX rose 1.9 percent. The gains of French CAC and Britains FTSE indexes were more modest at 0.4 percent and 0.6 percent respectively as a result of steep falls in French pharmaceutical Sanofi and UK-listed Standard Chartered Bank after they reported results that missed expectations. Stronger corporate reports have propped investor optimism after the market hit a low for 2014 just under two weeks ago. Asian shares advanced to one-month highs on Wednesday, helped by US market rally. Japanese stocks rose after better-than-expected industrial production data and upbeat earnings figures bouyed investor sentiment. Industrial production rose by 2.7 percent in September, the trade Ministry reported, the fastest pace since January. The Nikkei share average jumped 1.4 percent. MSCIs broadest index of Asia-Pacific shares outside Japan gained 0.7 percent, led by a 1.2 percent rise in South Korean shares. West Texas Intermediate crude rose as supply and recent economic data gave rise to speculation that fuel demand will increase in the US, the world’s biggest oil consumer. US crude stockpiles dropped by 3.7 million barrels, the American Petroleum Institute reported yesterday. And the data from the Conference Board showed consumer confidence in US advanced to a seven-year high in October, providing indication of better US economic outlook. WTI for December delivery rose as much as 41 cents to $81.83 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.71 at 1:07 pm Seoul time. Brent for December settlement gained as much as 35 cents, or 0.4 percent, to $86.38 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $4.60 to WTI, compared with $4.61 yesterday. Gold traded above a two-week low as investors assessed the health of the US economy before the Federal Reserve concludes a policy meeting. Gold for immediate delivery dropped to $1,222.62 an ounce yesterday, the lowest price since October 15, before rebounding as US data showed durable goods orders unexpectedly declined. It traded at $1,230.01 an ounce by 12:16 pm in Singapore from $1,228.52 yesterday. Russia joined Turkey in adding bullion to reserves according to the International Monetary Fund data. Silver for immediate delivery traded at $17.235 an ounce from $17.214. Spot platinum rose 0.2 percent to $1,269.75 an ounce from $1,266.75. Palladium was little changed at $793.93 an ounce after a four-day increase.
Posted on: Thu, 30 Oct 2014 09:03:23 +0000
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