Daytrading September 18 pre-market

Morning traders. Thanks Trees and after-market regulars.

Market wrap:

Australian shares are likely to open little changed after US stocks logged minor falls in volatile action after the Federal Reserve left its benchmark rate on hold.

The December SPI200 futures contract eased one point or less than 0.1% to 5106 as US stocks gave up a sharp initial spike following the Fed decision.

The Dow closed 65 points or 0.39% in the red after jumping as much as 193 points in the moments after the announcement late in last night session's. The S&P 500 gave up five points or 0.26%. The Nasdaq retained a gain of five points or 0.1%.

The US dollar slid to a three-week low and gold and US government bonds rallied after the Federal Reserve Open Market Committee decided that weak inflation and a slowing global economy were sufficient reason to sit on their hands last night. The FOMC voted 9-1 to leave the federal funds rate at its current record-low target range of 0-0.25%. Read more here and here.

While the US economy continued to expand at a moderate pace, “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” the FOMC statement said.

Traders initially welcomed the news by driving stocks to three-and-a-half week highs, but the euphoria wore off as the implications of the decision set in.

“Clearly the Fed was worried about developments abroad and that was, at first blush, the primary reason why rates were not raised this month,” Dan Greenhaus, chief strategist at BTIG in the US, told MarketWatch.


“If they don’t raise rates and continue to hold off on raising rates what does that say about the economy?" Carin Pai, director of equity strategy at Fiduciary Trust Company in the US, told Bloomberg. "That it’s not strong enough to withstand an interest rate increase. That’s what the market is grappling with right now.”

The defensive utilities sector was the pick of the ten S&P 500 industry groups, rising 1.3%. Regional banks were among the leading decliners, reversing gains once the decision was announced.

The NYSE Arca Gold Bugs index was another stand-out, rising 2.5% after gold caught a tailwind from a decline in the greenback. Gold for December delivery settled $2 or 0.2% lower at US$1,117 an ounce ahead of the rate verdict, but was lately up $11 or 1% at US$1,130.

The US dollar index slumped 0.95% to a level last seen during the August 'China devaluation' panic. However, the Australian dollar was this morning trading a quarter of a cent lower, buying 71.75 US cents.

Australian miners BHP and Rio Tinto mapped the broader market, shedding gains late in the US session. BHP gave up 0.37% and Rio Tinto 1.21%. Spot iron ore for import to China yesterday bounced 80 cents to US$56.80 a dry ton.

Oil closed lower before the Fed rate statement and was lately little changed. West Texas Intermediate crude oil for October delivery settled at US$46.90 a barrel, down 25 cents, or 0.5% and was lately at US$46.87.

Copper neared two-month highs after production in Chile was temporarily suspended following a massive earthquake. London copper closed 0.4% ahead and aluminium gained 0.3%. Lead declined 0.7%, nickel 1.5%, tin 0.2% and zinc 1.4%. US copper for December delivery was recently up 0.5% at US$2.46 a pound.

Europe's major equity gauges closed mixed but mostly little changed in cautious trade ahead of the Fed decision, one of the most closely-anticipated in decades. The Stoxx Europe 600 shed 0.18% and Britain's FTSE 0.68%. Germany's DAX edged up 0.02% and France's CAC 0.2%.

TRADING THEMES TODAY

SECOND-GUESSING WALL STREET: The Fed sat schtum, the market popped champagne corks, began to party and then went "Wait a minute - why'd they do that exactly?" The answer, once the market has 24 hours to think about it, may not be that welcome. In other words, Wall Street has not yet had time to give a true and considered verdict on last night's FOMC decision. As one of the first markets to open this morning, we will be at the mercy of broader international forces. Our futures are neutral, which seems appropriate considering the uncertainty. The XJO is back near the upper limit of its recent trading range but has not yet managed a 'higher high' to match recent 'higher lows'. Test resistance, test support or mark time? Place your bets.

ECONOMIC NEWS: RBA Governor Glenn Stevens is due to testify before the House of Representatives Economics Committee in Canberra from 9.30am EST. The US ends a big week with a whimper - a leading index is tonight's only scheduled economic item of any note.

Good luck to all.