Australian Stock Market Report - Morning
The People´s Bank of China has increased interest rates for the first time since December 2007. Both the benchmark lending rate and 1-year deposit rate were lifted by 25 basis points. The 1-year lending rate will rise to 5.56pct with the deposit rate rising to 2.50pct.
US housing starts rose by 0.3pct to a 610,000 annual rate in September, above expectations for a result near 580,000. But permits slumped 5.6pct to 539,000, below expectations.
European shares fell from the highest levels in almost six month highs on Tuesday after China lifted interest rates. In response to the rate hike, commodity prices fell, dragging currencies lower against the greenback and pushing down equity markets. The FTSEurofirst index fell by 0.5pct with the UK FTSE down by 0.7pct and the German Dax lower by 0.4pct.
US sharemarkets slumped on Tuesday. The surprise rate hike in China added to investor jitters on the anniversary of the 1987 sharemarket crash. Shares in Goldman Sachs rose 2.6pct after its latest earnings result. But Bank of America lost 4.2pct after a Bloomberg report indicated that Pimco, Blackrock and the Federal Reserve Bank of New York want Bank of America to buy back US$47 billion of mortgage bonds. The Dow Jones fell by 165pts or 1.5pct with the S&P 500 down 1.6pct and the Nasdaq lost almost 44pts or 1.8pct.
US treasuries rose again on Tuesday (yields lower) as investors sold equities and bought bonds in response to China´s surprise rate hike. US 2yr yields fell by 1pt to 0.359pct, and US 10yr yields fell by 4pts to 2.479pct.
Major currencies fell against the greenback in late European and US trade after China lifted interest rates just after 10pm Sydney time. The Euro fell from highs near US$1.3955 to US$1.3715, ending US trade near US$1.3730. The Aussie dollar fell from highs around US99.00c to almost US96.60c, ending US trade near US96.80c. And the Japanese yen held in a range of 81.30 yen per US dollar to JPY81.90, ending US trade near JPY81.55.
US crude oil prices slumped on Tuesday in line with other commodities in response to China´s rate hike and a rebound of the US dollar. The Nymex crude oil contract fell by US$3.59 or 4.3pct to US$79.49 a barrel. It was the biggest fall in percentage terms since February 4.
Base metal prices fell on the London Metal Exchange on Tuesday as investors feared weaker demand in the wake of China´s rate hike. Metals fell by 1.5-2.2pct. And the gold price also fell with the Comex gold futures price lower by US$41.40 an ounce or 3pct to US$1,330.70.
Ahead: In Australia, private sector wealth figures are released. BHP Billiton releases its production report. Woolworths releases quarterly sales. In the US the Beige Book is released.
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