The likely market-moving Federal Reserve meeting and news conference are still on deck Wednesday afternoon, after the settlement for gold futures.
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Japan’s central bank took an unexpected step Wednesday, launching a 10-year interest rate target to step up its fight against deflation. Oil rose after government data showed USA crude inventories declined to the lowest level since February. The Dow is up 61.50 points or 0.3 percent at 18,191.46, the Nasdaq is up 26.12 points or 0.5 percent at 5,267.48 and the S&P 500 is up 9.29 points or 0.4 percent at 2,149.05. In corporate news, Viacom Inc. The 10-year JGB yield climbed to as high as positive 0.005 percent and then retreated to negative 0.025 percent.
In other commodities, the December gold contract rose $13.20 at US$1,331.40 per ounce, the October contract for natural gas added on a penny at US$3.06 per mmBtu and December copper was down a cent at US$2.15 a pound.
The Fed strongly signalled that it could raise interest rates this year if the labour market improved further.
Japanese shares rose almost 2 percent and bank stocks leapt 7 percent after the BOJ not only refrained from taking interest rates further into the negative but pledged to steepen the yield curve.
Stocks in the so-called peripheral countries were among the biggest Stoxx Europe 600 index’s winners today: Italy’s Banco Popolare and Spain’s and Banco Popular Espanol jumped at least 3.6 percent.
The yield on the USA 10-year note fell two basis points, or 0.02 percentage point, to 1.67 percent in NY, according to Bloomberg Bond Trader data. The Fed next meets November 1-2, but few observers expect an increase then.
This new target, or yield curve control means it will buy as many long-term Japan Government bonds to ensure that their yields – or zero rate target – is met.
It included slashing interest rates – its benchmark is at a 0.1 percent negative rate.
“The case for an increase in the federal funds rate has strengthened”, the USA central bank said in a statement following a two-day policy meeting.
The Fed has held its target rate for overnight lending between banks in a range of 0.25 percent to 0.50 percent since December, when it raised borrowing costs for the first time in almost a decade.
“That really stands out that they’ve become significantly more dovish in their projection materials, but clearly trying to signal to the market that December is very much live”, said David Keeble, New York-based head of fixed-income strategy at Credit Agricole SA.
Japanese government bond yields briefly rose following the decision. “Keeping the depo rate at -0.1 percent and not boosting asset purchases doesn’t seem a recipe for yen depreciation”, he said.
Gasoline stocks fell by 3.2 million barrels, compared with expectations of a 567,000 barrels drop. Prices maintained gains after the Federal Reserve left its policy rate unchanged for a sixth-straight meeting.
The Nikkei 225 rose 315.47 points, or 1.91 percent, to 16,807.62, up from a modest level of 0.3 percent gain before the decision.
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The Fed expects growth will remain tepid for the next three years, the latest evidence it is pessimistic about the economy’s potential to expand more quickly.
