The Federal Reserve kept its key interest rate unchanged Wednesday but signaled it is likely to raise it later this year.
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“The immediate reaction across markets to the Fed’s decision. has been lower treasury yields, higher stock prices and a weaker dollar”, said Jasper Lawler, an analyst at CMC Markets in London.
Crude oil prices rose, extending gains for the third consecutive day after an industry report showed an unexpected 6.2 million-barrel decline in USA crude inventory last week to 504.6 million barrels. The Standard & Poor’s 500 index picked up 19 points, or 0.9 percent, to 2,159. It last traded at $4,838.0 per tonne, after having risen to as high as $4,858.5 on Thursday. Real estate companies rose as investors, comfortable that interest rates would remain low, looked for income.
As expected the Fed made a decision to hold the target range for the federal funds rate unchanged at the policy meeting that concluded today. Japan’s central bank said it would adjust the volume of its asset purchases as necessary in the short term, while keeping it at about 80 trillion yen (S$1.07 billion) annually over the long term. Futures prices indicate the chance of a rate hike by December climbed to 61 per cent, from 52 per cent a week earlier. “Saying it is waiting for more evidence in the time being, despite the case for a rate hike having strengthened, suggests that barring significant events the rate hike will not be long in coming”.
For the first time in almost two years, there were three dissents to the Fed’s statement Wednesday. The Fed’s next scheduled meeting is in November, six days before the presidential election, and another will be held in mid-December. Brent crude, used to price worldwide oils, rose 49 cents to $47.32 in London. Gains are led by energy and information technology. Analysts had expected a 0.3% increase.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was steady and within sight of its highest levels since July 2015 that it hit in early September.
ENERGY: Benchmark U.S. crude added 49 cents to $45.83 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 98 cents to settle at $46.32 a barrel on Thursday.
Data on Friday showed euro zone business activity growing, but not by enough to change the direction of bond yields. The yield on the benchmark 10-year bond fell 15 basis points to 2.480 percent, the yield on 7-year note ended 11 basis points lower at 2.185 percent and the yield on short-term 2-year note slid 9 basis points to 1.915 percent. As such, stronger growth in the third quarter may well be just temporary. Its stock climbed $6.62, or 6.6 percent, to $107.24.
Working against a rate hike, inflation is now short of the 2% mark that the Fed would like to see in order to increase rates, Yellen said. Those steps could have weakened the yen.
The dollar and the yen fluttered in narrow ranges on Wednesday, penned in by uncertainty about the outcome of Bank of Japan and Federal Reserve policy meetings.
FLAT TIRE: CarMax lost $1.05, or 1.9 percent, to $54.71 after the used vehicle dealership reported weaker than expected sales. Caixabank shares were down 2.4 per cent.
“If we had not received these mixed messages, I don’t think anybody would have been surprised”, said Sam Stovall, U.S. equity strategist for S&P Capital IQ.
BUYBACKS: Microsoft said it will buy back $40 billion in stock and also raised its quarterly dividend.
Freeport-McMoRan, the mining giant, jumped 44 cents, or 4.2 percent, to $10.98. It gained 95 cents the previous session.
The euro fetched $1.1211, recovering from Wednesday’s three-week low of $1.1123. Natural gas gained 1 cent to $3.06 per 1,000 cubic feet. Spot gold (XAU=) was up 1.2 percent at $1,330.08 an ounce. Copper fell 1 cent to $2.16 a pound.
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OVERSEAS: Germany’s DAX rose 0.5 percent and the FTSE 100 of Britain added 0.2 percent.
