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.
