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Market report: Thursday, March 17

Business

The Australian market looks set to open higher following gains on Wall Street after the US Federal Reserve left interest rates unchanged and signalled fewer rate rises for the year.

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At 8.10am (AEDT) on Thursday, the share price index was up 36 points at 5,162.

Locally, in economic news on Thursday, Reserve Bank of Australia assistant governor for financial markets Guy Debelle is scheduled to speak at the FX Week Australia conference in Sydney.

The Australian Bureau of Statistics releases labour force data for February.

In equities news, Myer and Oroton are slated to release half year results, while Oneview Healthcare lists on ASX.

The Australian dollar is sharply higher after the US Federal Reserve’s dovish tone indicating it expected tepid growth in the world’s largest economy.

The local unit was trading at 75.58 US cents, up from 74.89 US cents on Wednesday.

NEW YORK – Wall Street has gained after the US Federal Reserve left interest rates unchanged and signalled fewer rate hikes for the year.

The Fed indicated moderate US economic growth and “strong job gains” would allow it to tighten policy in 2016 with fresh projections showing policymakers expected two quarter-point rises by the year’s end, half the number seen in December.

The decision to keep rates steady was in line with analyst predictions.

“The market has been pricing two hikes at the most and their adjustment of the end of year forecast is consistent with two hikes,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

“So yes, the market is basically saying, ‘We had it right’.”

LONDON – Britain’s top share index rose as oil and gas stocks and housebuilders rallied on the back of proposals in UK finance minister George Osborne’s annual budget statement.

Osborne cut Britain’s economic growth forecast for 2016 and 2017, which sent sterling to a two-week low against the dollar.

“There (are) some big question marks in regards to targets as far as the economy is concerned and being able to turn a surplus,” said Alastair McCaig, market analyst at IG.

Investors, however, were cheered by a reduction of the rate of “supplementary charge” on oil and gas produced to 10 per cent from 20 per cent, effectively abolishing petroleum revenue tax.

British finance minister George Osborne has unveiled a new sugary drinks tax to fight childhood obesity, as he blamed a “dangerous cocktail” of risks from the global economy for derailing his fiscal plans.

HONG KONG – Asian shares were mostly lower while the US dollar dithered as markets waited anxiously for the Federal Reserve to provide guidance on the risk of US rate rises in 2016.

Spreadbetters expected the cautious mood to extend into Europe, forecasting a flat to modestly higher open for Britain’s FTSE, Germany’s DAX and France’s CAC.

While no move is expected at this meeting it does include updates of Fed members’ economic projections and a news conference with Chair Janet Yellen, events that have caused violent market reactions in the past.

“There’s no question that the FOMC is expected to provide the much-needed clarity global markets need in order to move forward with some sense of conviction,” said Stefan Worrall, director of Japan equity sales at Credit Suisse. “Ahead of that, we’re seeing a very pregnant pause and an air pocket of conviction.”

WASHINGTON – The Federal Reserve has held interest rates steady and indicated that moderate US economic growth and “strong job gains” would allow it to tighten policy this year.

Underlying US inflation increased more than expected in February as rents and medical costs maintained their upward trend, which could keep the Federal Reserve on course to gradually raise interest rates this year.

ENERGY

Oil prices have surged after OPEC sources said producers, including Gulf OPEC members, support holding talks in April on freezing output even if Iran won’t take part.

The weaker USdollar further boosted crude and other commodities.

US, or WTI, crude had gained 5.9 per cent, or $US2.17, to $38.51 a barrel, at 0757 Thursday AEDT, while Brent was up 4.03 per cent, or $US1.56, at $40.30.

PRECIOUS METALS

Gold has turned higher after the Federal Reserve held interest rates steady, as expected, and indicated the US continues to face risks from an uncertain global economy, pressuring the US dollar.

However, fresh projections showed that policymakers expected two quarter-point rate rises by year’s end.

Volatility in equities and oil prices, a raft of mixed economic data, and concerns over global growth had curbed expectations for further rises, allowing gold to lift more than 17 per cent in 2016.

“The 50 basis point average drop in the dot plot for 2016 and 2017 combined with the defensive, almost timorous ‘global risks’ comment has gold surging almost $US25 as two-year yields plummet nine basis points and the (US) dollar is under heavy pressure,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

BASE METALS

Copper has fallen in cautious trade ahead of the outcome of a Federal Reserve policy meeting, that later left interest rates on hold but signalled how quickly the bank may tighten this year.

“As we go into the second quarter we should get some physical buying picking up, maybe some restocking,” said Robin Bhar, head of metals research at Societe Generale.

“But we’d need to see a turnaround in inventories to really put a solid floor under prices.”

ASX stocks to watch on Thursday, March 17
BHP – BHP BILLITON

FMG – FORTESCUE METALS GROUP

RIO – RIO TINTO: Shares in the mining giants could benefit from an increase in the price of iron ore overnight.

MYR – MYER: Struggling retailer Myer is expected to update the market on its $600 million turnaround plan when it unveils its half year results on Thursday.

ORG – ORIGIN ENERGY

STO – SANTOS

Energy companies may see their shares extend gains after oil prices surged overnight with WTI gaining nearly 6 per cent and Brent up close to 4 per cent.

ORL – OROTON GROUP: Oroton Group is slated to post half year results on Thursday.

AAP

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