Australian Stock Market Report
The US Federal Reserve has left the federal funds target between zero and 0.25 percent but it has elected to further support a slowing economy. The Fed will reinvest "principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature."
The Fed voted 9-1 in favour of the decision with Thomas Hoenig opposing the decision to keep the federal funds low "for an extended period."
European shares fell on Tuesday with mining and energy stocks easing in response to lower metal and oil prices and fears of slower global growth. In London trade shares in BHP Billiton fell by 2.3pct with Rio Tinto down 2.0pct. The FTSEurofirst index fell by 0.8pct with the UK FTSE lower by 0.6pct and the German Dax fell by 1.0pct.
US sharemarkets eased on Tuesday but finished well off their lows following the Federal Reserve decision. At one point the Dow Jones was down by 147 points, but after the Fed decision it was close to flat. At the end of trade the Dow Jones was lower by 54pts or 0.5pct with the S&P 500 down 0.6pct and the Nasdaq lost 28.5pts or 1.2pct.
US treasuries rose on Tuesday (yields lower) following the Federal Reserve decision to reinvest maturing mortage debt into government securities and add support to the economy. US 2yr yields fell by 2pts to 0.525pct and US 10yr yields fell by 7pts to 2.77pct.
The US dollar fell sharply against major currencies following the Federal Reserve decision to add more stimulus to the US economy. The Euro rose from lows near US$1.3070 to around US$1.3225, ending US trade near US$1.3180. The Aussie dollar lifted from lows near US90.60c to US91.60c, ending US trade near US91.35c. And the Japanese yen strengthened from its weakest levels around 86.20 yen per US dollar to JPY85.20, ending US trade near JPY85.40.
US crude oil prices fell on Tuesday on fears of slower growth in China and the US as well as a firmer greenback. But losses were trimmed after the Fed rate decision. The Nymex crude oil contract fell by US$1.23 or 1.5pct to US$80.25. At one point oil hit US$79.20 a barrel. US London Brent crude fell by US$1.36 to US$79.63 a barrel.
Base metal prices fell on the London Metal Exchange on Tuesday as investors fretted about slower growth in China and a subdued US economy. Metals fell between 0.6-3.4pct with aluminium doing best and lead doing worst. And the Comex gold price fell as the US dollar strengthened ahead of the Fed rate decision. Comex gold fell by US$4.60 an ounce to US$1,198.00.
Ahead: In Australia, consumer sentiment and lending finance data are released. Commonwealth Bank, Stockland and Computershare release earnings results. In the US the monthly trade and budget figures are released.