At 10.12am (AEDT) on Thursday, the benchmark S&P/ASX200 index was up 38.7 points, or 0.77 per cent, at 5,067.1, while the broader All Ordinaries index was up 38.6 points, or 0.76 per cent, at 5,117.3.
On the ASX 24, the December share price index futures contract was up 69 points at 5,092 with 10,928 contracts traded, the contract expires at midday.In a widely expected decision, the Fed raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 per cent and 0.50 per cent
However, the focus for markets was on the outlook for further rate hikes, with the Fed indicating it was likely to be “gradual”, and dependent on the rate of inflation
St George senior economist Janu Chan said financial markers welcomed the news, with US shares rising and putting downward pressure on safe haven assets like bonds
“Equity markets greeted the news positively either taking heart from the sign that the US economy was strong enough to withstand a hike, or on the signal that further tightening will be limited,” she said.
“Movements in other asset markets were rather orderly, although there was some initial volatility straight after the announcement.”
At 8.30am (AEDT) on Thursday, the March 2016 10-year bond futures contract was trading at 97.020 (implying a yield of 2.980 per cent), down from 97.060 (2.940 per cent) on Wednesday.
The March 2016 three-year bond futures contract was at 97.800 (2.200 per cent), down from 97.840 (2.160 per cent).
Locally on Thursday, the Reserve Bank releases its quarterly bulletin, containing its latest research.
And in equities news, agribusiness Elders and explosives and fertiliser maker Incitec Pivot both hold their annual general meetings.
In Australia, the market on Wednesday rose by more than 2 per cent, breaking a six-day losing streak as investors snapped up bargains.
NEW YORK – US stocks have rallied after the US Federal Reserve announced the raising of its key policy rate for the first time in nearly a decade.
The Fed made clear that the 25-basis point rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.
“Wrapped in dovish language, the Federal Reserve has just embarked on what will be the loosest tightening in its history,” said Mohamed El-Erian, chief economic advisor at Allianz in Newport Beach, California.
“The Fed is going out of its way to assure markets that, by embarking on a ‘gradual’ path, this will not be your traditional interest rate cycle. Instead it will be one remembered as an unusually loose tightening.”
LONDON – European shares rose on Wednesday ahead of the outcome of a crucial rate-setting meeting of the US Federal Reserve for clues about the market’s near-term direction.
The pan-European FTSEurofirst index ended up 0.3 per cent, after climbing 2.9 per cent in the previous session following a rebound in crude oil prices.
TOKYO – Asian share markets surged on Wednesday, as confidence returned to markets ahead of the expected US interest rate rise.
“A lot of capital will be looking for a temporary home outside of the US so as to avoid the likely increase in volatility after the (Fed rate hike) hammer falls,” said Martin King, co-managing director at Tyton Capital Advisors.
“And in the context of our current world markets, for many Japan looks like a credible home.”
Asia’s gains helped emerging market stocks climb 1.2 per cent as they gunned for their second consecutive rise having been bashed by nine straight falls before that.
ENERGY
Global crude oil prices were lower ahead of the US Federal Reserve’s interest rate decision after a report showed there was an increase in US inventories.
Brent crude resumed its slide and was down 3.2 per cent after snapping a seven-day losing streak on Tuesday after US government data showed a huge build in crude inventories.
New York’s main contract, West Texas Intermediate for delivery in February, dropped four per cent at $35.52.
PRECIOUS METALS
Gold has held onto its gains, after the Federal Reserve raised US interest rates for the first time in nearly a decade, as expected, making clear it was a tentative beginning to a “gradual” tightening cycle.
The US central bank’s policy-setting committee raised the range of its benchmark rate by a quarter percentage point to between 0.25 and 0.50 per cent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
“Gold has held steady as the dovish statement and lower dot plot has leavened the impact of the first rate hike in nine years,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
“The muted reaction suggests that the weakest shorts covered earlier today when gold traded above $US1,078.”
Spot gold was up 1.2 per cent at $US1,072.71 an ounce, below the session high of $US1,078.20. Prior to the Fed’s statement, US gold futures for February delivery settled up 1.4 per cent at $US1,076.80 an ounce.
BASE METALS
Copper prices are higher, recovering from a one-week low hit a day earlier as investors covered short positions ahead of an expected US rate rise.
The US dollar edged back from a near one-week high, offering temporary relief to non-US investors buying dollar-priced metals.
The US dollar moves were limited, however, as the Federal Reserve is seen delivering its first rate hike in nearly a decade.
“There’s been short covering ahead of the Fed … (but) people are cautious of getting too long.
It would be amazing not to see the US dollar rally in the event of a hike,” said Vivienne Lloyd, analyst at Macquarie.
She added, however: “(copper) prices could lift (higher) from here, there are some supply constraints … (and) the China data is not a major disaster, there are a few bright spots.”
Three-month copper on the London Metal Exchange (LME) closed 1 per cent higher at $US4,609 a tonne, reversing losses from Tuesday when it hit $US4,554, the lowest since December 8.
The Federal Reserve has hiked interest rates for the first time in nearly a decade on Wednesday, signalling faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis.
A big jump in apartment construction in the US Midwest and South boosted the pace of homebuilding in November, marking a solid bounce back after tumbling in October.
The United States appears on the brink of ending a four-decade ban on most exports of crude oil.
ASX stocks to watch today
ELD – ELDERS – up seven cents, or 1.55 per cent, at $4.60: Agribusiness Elders holds its annual general meeting on Thursday.
IPL – INCITEC PIVOT – down two cents or 0.54 per cent, at $3.70: Explosives and fertiliser maker Incitec Pivot holds its annual general meeting.
AAP
