Fed Estimates Low Rates; Greek Bailout Cost Soar

Arthi Gupta, Mayank Mehta and Sanjay Barot
28 Apr, 2010
New York City

Fed left its interest rate target near zero and noted that though the economic activities are picking up, labor markets remain weak and substantial resource slack continue to restrain cost pressure and rates are likely to remain low for an extended period of time.

[R]4:00 PM New York – Fed left its interest rate target near zero and noted that though the economic activities are picking up, labor markets remain weak and substantial resource slack continue to restrain cost pressure and rates are likely to remain low for an extended period of time.[/R]

Fed left benchmark interest rate range between zero and 0.25% and noted in a statement that rates are likely to remain low for an extended period of time.

Fed noted in an accompanying statement, “With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”

U.S. stocks at the opening braved fast spreading contagion worries in Europe but traded volatile in the day and managed to close higher. Positive earnings lifted stock indexes in New York however market indexes in Europe and Asia declined. Talks of Greek bond defaults are increasingly viewed with greater certainty as 2-year Greek bonds surge to 23% and 10-year bond yields rise to 11.1%.

Robert Half International Inc led the decliners in the S&P 500 index with a loss of 11% after the staffing company reported lower sales and earnings. Wyndham profit rises. General Dynamics net income up 1.2%. Hess Corp swings to profit on revenue increase of 34%. AOL earnings drop 58% in first quarter. Sprint Nextel loss widens.

European stocks declined as Greek bond yields surge to record level and bonds of Portugal and Spain decline sharply. The euro dropped to one-year low against the dollar. Merck KGaA and Puma decline. Continental AG sees 2010 sales up as much as 10%. Rhodia SA swung to a quarterly profit. Renault SA quarterly sales increased 28%.

UK stocks closed lower despite positive earnings. The situation in euro zone took another negative turn after the rating agency S&P lowered Spain debt rating a day after Greece and Portugal debts were downgraded. Investors are increasingly worried that without a speedy political solution, Greece may default on its debt. Shell, GlaxoSmithKline profits beat market expectations.

Stocks in Japan dropped sharply after world markets declined. Rating downgrade of Greek and Portugal debt raised fears of wider contagion in the euro region. Japan Airlines accelerated route cuts and estimated loss in the year. March retail sales surged at the fastest pace in thirteen years ahead of increase in consumption tax.

Property developers led the decliners in Hong Kong and Shanghai trading. China postponed a residential land auction to next month after bids exceeded the upper limit set by the government. Beijing will issue new directive for second and third homes in the city. Bank of Beijing 2009 net profit edges up. Bank of China first quarter net increase 41%. Haitong Securities posts expected flat first quarter net.

World market declines overshadowed positive earnings dragging market indexes and rupee lower. Bharti Airtel Ltd fourth quarter profit declined 8% on severe price competition. Canara Bank quarterly net profit gained declined 30%. LIC Housing Finance Limited quarterly net rose 36%.

The benchmark index in Australia declined 1.2% after world markets dropped. A downgrade of Greek and Portugal debt lifted bond yields to record high and the euro fell nearly 1%. Macarthur Coal third quarter sales surge 50%. In Sydney trading banks declined.

North American Markets

Dow Jones Industrial Average increased 28.56 or 0.30% to close at 11,020.55, S&P 500 Index edged higher 4.41 or 0.4% to 1,183.71 and Nasdaq Composite Index fell 5.49 or 0.5% to close at 2,465.98. Toronto TSX Composite Index declined 59.92 or 0.5% to 12,086.82.

Latin American Markets Indexes

Mexico Bolsa Index added 217.33 or 0.7% to 32,896.69 and Brazil Bovespa Stock Index declined 24.66 or 0.04% to 66,486.44.

Europe Markets Review

In London FTSE 100 Index closed higher 20.25 or 0.36% to 5,623.77, in Paris CAC 40 Index decreased 17.58 or 0.46% to close at 3,827.02, in Frankfurt DAX index lower 25.44 or 0.41% to close at 6,134.07. In Zurich trading SMI decreased 24.51 or 0.37% to close at 6,642.96.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 287.87 or 2.57% to 10,924.79, Hang Seng index in Hong Kong decreased 312.39 or 1.47% to 20,949.40 and CSI 300 index in China lower 11.06 or 0.36% to 3,097.35. ASX 200 index in Australia decreased 57.20 or 1.17% to 4,822.80. The FTSE Bursa KL Composite index in Malaysia closed lower 6.55 or 0.49% to 1,333.17.

The Kospi Index in South Korea decreased 15.64 or 0.89% to close at 1,733.91. SET index in Thailand closed lower 12.51 or 1.64% to 749.49 and JSE Index in Indonesia decreased 35.98 or 1.22% to 2,903.32. The Sensex index in India decreased 310.54 or 1.76% to 17,380.08.

Commodities, Metals, and Currencies

Crude oil increased $0.81 to $83.25 a barrel for a front month contract, natural gas edged up 6 cents to $4.27 per mBtu and gasoline increased 0.31 cents to 232.99 cents.

Soybean future closed up 0.50 cent to $9.93 a bushel. Wheat futures decreased 2.50 cents in Chicago trading to $4.88 a bushel. Sugar closed down 0.51 cents at 14.86 cents per pound.

Gold increased $6.20 in New York trading to close at $1,168.40 per ounce, silver closed down $0.009 to $18.14 per ounce and copper for the front month delivery increased 1 cent to $3.39 per pound.

Dollar edged higher against euro to $1.319 and decreased against the Japanese yen to 94.15.

Yield on 10-year U.S. bonds increased to 3.76% and with 30-year maturities added to 4.63%.