USA stocks surged Wednesday with the Nasdaq hitting a fresh record after the Federal Reserve kept interest rates low.
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“The Bank of Japan is saying, “it’s not going to be us”, said James Alexander, co-head of global fixed income at Nikko Asset Management. On Wall Street, the future for the Dow Jones industrial average was up 0.1 per cent while the Standard & Poor’s 500 was unchanged.
Spot gold fell 0.3 percent to $1,311.43 an ounce by 0449 GMT.
Government 10-year yields tumbled 8.8 points to 2.04 per cent and United States 10-years dropped 5 points to 1.65 per cent as the Fed downgraded its medium term GDP forecast to 1.8 per cent from 2 per cent. While the bank strengthened its forward guidance by committing to an “overshoot” of consumer-price gains, it refrained from moving deeper into negative interest-rate territory. The eurozone economy is growing slowly, but inflation remains well far below the ECB’s 2 percent annual target. That helped reinforce wagers that central-bank policies will remain supportive as they seek to boost growth and push up inflation toward their targets.
CURRENCY: The dollar edged up to 100.71 yen from Wednesday’s 100.30 yen.
US crude (WTI) futures advanced 0.9 percent to $45.75 after soaring 2.9 percent on Wednesday. Japan’s benchmark Nikkei 225 index jumped 1.9 per cent on Wednesday on the news. Brent crude, used to price worldwide oils, rose 95 cents, or 2.1 percent, to $46.83 a barrel in London. Brent crude futures rose 0.8 percent to $47.21, adding to gains of 2 percent on Wednesday.
ADOBE JUMPS: Software maker Adobe Systems climbed after it raised its forecasts for the year. Its stock climbed $7.16, or 7.1 percent, to $107.78. Market pricing for a December move rose only a fraction to 59.3 percent 0#FF: , from 59.2 percent, according to CME Group’s FedWatch tool.
KB BEAT: KB Home added 58 cents, or 3.5 percent, to $15.51 after the homebuilder disclosed strong results.
Domestic growth has been sluggish, and jobs reports have bounced from surprising to disappointing throughout the year.
“Activity in the labour market and the broader economy has been solid, but wages and inflation continue to undershoot their target and they are anxious about it feeding into inflation expectations”, Su-lin Ong, senior economist at RBC Capital Markets in Sydney. And Microsoft Corporation (NASDAQ:MSFT) gained 1.7% on an 8.3% increase to its quarterly dividend and a new $40 billion buyback authorization. The stock rose $10.29, or 6.3 percent, to $172.94.
“Despite there being enough to suggest a rate hike in November or, even more likely, December, the markets were buoyed by the simple fact that the Federal Reserve opted for inaction”, said Spreadex analyst Conor Campbell.
In recent weeks, several Fed members have outspokenly championed a near-term rate hike despite uneven USA data and questions over the health of the global economy.
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While the BOJ may be able to contain yields from an overshoot and guide them towards zero for 10-year notes using the new operations, it is unclear how the bank can cope if yields drop to lower levels than those policy makers deem appropriate, said Katsutoshi Inadome, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities Co.in Tokyo. Oil and commodities firms gained the most as oil and metal prices rose, while the weakened dollar made the climbing easy for the euro, pound and Swiss franc.
