World Summary: MARKET SOARS AS RATES UP BUT NO SURPRISES
07:34, Friday, 30 June 2006
Sydney - Thursday - June 29: (RWE Aust Business News) - The US
equity market surged higher overnight after the Fed moved as financial
markets expected with no real surprises in the FOMC statement.
The Fed Fund rate target rose 25 basis points to 5.25 per cent as
most analysts predicted with hints of more rises to come.
It was the 17th consecutive rate rise since the cycle began in
mid 2004 when the rate was 1 per cent, the lowest level for about 30
years.
Talk of a rate pause gained little credence but left the door
open to further rate rises.
FOMC members are determined to fight inflation and emphasised
further increases would occur if required.
In the FOMC statement after the decision, members said readings
on core inflation have been elevated in recent months.
"Ongoing productivity gains have held down the rise in
unit labor costs, and inflation expectations remain contained.
"However, the high levels of resource utilization and of the
prices of energy and other commodities have the potential to
sustain inflation pressures.
"Although the moderation in the growth of aggregate demand
should help to limit inflation pressures over time, the
Committee judges that some inflation risks remain, the statement
declared.
Wall Street's Dow settled 217 points higher after a strong
buying splurge in the last hour of business.
The S&P 500 gained 27 points while the Nasdaq composite ran up 63
points almost doubling the figure shown an hour earlier.
The 100 index followed a similar pattern climbing 47 points on
the close.
Investors brushed another advance in oil prices which saw the
August crude contract rise $1.33 to $73.52 barrel on the New York
Mercantile Exchange overnight.
The US dollar fell to a two months low on the yen and lost on the
Europeans in the wake of the Fed Fund rate rise.
`
The Aussie dollar showed good form, climbing almost a cent to
US73.83c out of New York.
Treasuries rallied, reflected by the 10 year cash paper yield
falling 4 points to 5.21 per cent.
The 30 year bond yield fell 3 points to 5.26 per cent and the 2
year note yield came off 8 points to 5.20 per cent.
On the economic front the US economy grew at a 5.6% rate in the
first quarter, stronger than previously thought and the fastest pace in
nearly three years.
Initial jobless claims rose slightly in the latest week.
In other news the Supreme Court blocked the Guantanamo tribunal
system, ruling 5-3, declaring the the commission violates both military
rules and the Geneva Conventions.
President Bush says he plans to legislate to cover such trials.
Precious and base metals found renewed support, with gold
recovering $7.50 to $586.50 oz on the new COMEX spot month.
WALL STREET ... The Dow Jones industrial average index settled
217.24 points higher at 11,190.80. The Standard and Poor's 500 index
ended 26.87 points higher at 1272.87 while the Nasdaq Composite index
finished 62.54 points in front at 2174.38 and the Nasdaq 100 index closed
47.31 points ahead at 1585.56 on the close.
Treasuries rallied after the
FOMC statement and the 10 year auction. The 10 year cash paper rose 11/32
ticks to 99 12/32, trimming the yield 4 points to 5.21 per cent. The
30-year bond yield fell 3 points to 5.26 per cent and the 2 year note
yield lost 8 points to 5.20 per cent.
US DOLLAR ... has been lower against major currencies as the Fed
Fund rate moved up as anticipated. It is trading at 115.13 yen from
around 116.40 previously in New York. The Euro is $US1.2656 against
1.2557 while sterling is $US1.8270 compared with 1.8189 previously. The
US dollar declined on the Swiss franc, trading at 1.2373 against 1.2458
previously.
AUSTRALIAN DOLLAR ... has moved up strongly on the greenback,
gaining almost a cent in New York trading overnight. The dollar is
currently at US73.83c in New York trading. This compared with yesterday's
local close of US72.86c. Overnight, it has traded as high as US73.99 and
as low as US72.77c. Crosses mixed with the Aussie worth 84.99 yen (pre
84.91), 0.5832 euros (pre 0.5810) and 40.40 pence on sterling (pre
40.10).
EUROPEAN SHAREMARKETS ...beat the gun and surged higher in the
best advance for weeks before news that the Fed had lifted interest rates
25 points to 5.25 per cent as expected. Commodity-price sensitive stocks
again led improvers as investors waited for the FOMC decision. Key
markets set the trend for all European markets. Frankfurt climbed 135
points, London 113, Paris 106 and Zurich 109. The pan-European Dow Jones
Stoxx 600 index was up 0.6% at 312.54, with miners and oil companies
showing good form including Xstrata and Antofagasta along with oil stocks
BP and Royal Dutch Shell.
Oil prices continued to rise, moving above $73
barrel. However BP was in trouble with authorities after the company was
accused of cornering the US propane market in 2004, briefly sending
prices higher across the rural Northeast.
In the beverage sector alcoholic-drinks maker Diageo, fell
despite disclosing profit for the year met expectations.
In London Brambles gained after it reaffirming ed its positive
outlook for the year, saying it expects "good profit" and solid cash
generation.
Telecoms group BT found strong support as dealers reported
positive feedback from meetings between the company and investors as well
as ongoing speculation of a bid for the company.
At the close, London's FTSE climbed 112.9 points to 5791.50, the
Paris CAC-40 jumped 106.38 to 4880.38 while the Frankfurt DAX put on
124.8 to 5581.67 and Zurich advanced 109.18 to 7541.08. Other markets
followed suit with Amsterdam up 8, Brussels 53, Madrid General 21, Milan
366 and Oslo finished 5 ahead.
METALS ... firmer. Precious metals contracts have switched into
the new month. The COMEX July gold spot month contract rose
$7.50 to $586.50 oz while the August contract advanced $7.90 to $588.90
oz. July silver jumped 17.8c to $10.378 oz. July platinum put on $27.50
to $1205.70 oz, while spot copper (July) ended 13c higher at 342.30c lb
in New York.
Three months closing LME bid prices were copper $7270 tonne,
tin $7900, lead $980, zinc $3050, aluminium $2540 and nickel $20,850
tonne.
Earlier, on the three months official bid prices, copper
gained $85 to $6991 tonne while tin slipped $5 to $7970, lead eased $1
to $976.50. Zinc gained $50 to $3050, aluminium added $7 to $2516 and
nickel ended $600 higher at $21,050 tonne.
OIL ... settled $1.33 higher at $73.52 barrel on the spot August
contract on the New York Mercantile Exchange with a high of $73.55 and
low $72.55 barrel. The September contract gained $1.37c to $73.55 barrel
with a high of $74.51 and low $73.55 The Brent ICE June crude futures
advanced $1.49 to $72.90 barrel with a high of $73 and low $71.58 barrel.
The CRB index rose 4.11 points to 342.3.
ENDS
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