Fed Minutes Lift Hopes for U.S. Stimulus; Oil Eases

Devan Biswas
12 Oct, 2010
New York City

U.S. stocks rebounded after the Fed minutes noted its willingness to buy more U.S. Treasuries. Banks and consumer sector stocks closed higher. The dollar struggled as the markets in Asia and Europe closed lower.

[R]4:00 PM New York – U.S. stocks rebounded after the Fed minutes noted its willingness to buy more U.S. Treasuries. Banks and consumer sector stocks closed higher. The dollar struggled as the markets in Asia and Europe closed lower.[/R]

U.S. stock traded lower ahead of the minutes of meeting from the Fed but regained most of the losses after the release. The Fed showed its willingness to purchase U.S. Treasuries to stimulate the economy. Goldman Sachs in a research note said that the Fed may purchase $500 billion through June 2011.

Pfizer agreed to buy King Pharma for $3.6 billion. Chevron sold 23.44% Colonial Pipeline stake to the private equity group KKR. Dollar Tree agreed to buy Canada based Dollar Giant Store for more than $50 million.

U.S. stocks traded lackluster as the dollar edged lower and commodities traded near recent highs. Google Inc increased 1% after it formed a joint venture to distribute electricity. King Pharmaceuticals soared on a takeover agreement with Pfizer. Global Payments Inc dropped on lower than expected earnings.

The European indexes gained after German inflation and WPI rose in September. French current account deficit widened in August and Holland recorded trade surplus of €3 billion. Hungary and Swedish inflation rose in September.

The UK indexes slid after retail sales growth slackened and home prices fell in September. The UK economy slowed in the third quarter but annual inflation remained at 3.1% in September and trade deficit narrowed in August.

The yen resumed its ascent and closed at 15-year high against the dollar and record high against the euro. The benchmark index Nikkei dropped 2.1%. Household sentiment drops in September. Japan is likely to surpass China and as the largest holder of U.S. Treasuries. The two nations hold $1.66 trillion of U.S. debt.

Stocks in Shanghai continued their rally to reach a five-month high aided by commodity stocks. Banks closed lower after China temporarily increases the reserve ratio of some large banks to curb liquidity. China Vanke sales nine-month sales soared more than 50%.

Stocks in Mumbai fell after the industrial output increased sharply lower. Rupee closed lower. Industrial production index increased 5.6% in August and in the first five months the index was up 10.6% compared to a year ago. Coal India is expected to raise as much as $35 billion.

Australian shares closed lower in a broad sell-off after business confidence fell in September even though business conditions index rose. Karoon Gas proposes to list its South American asset in a public offering in Brazil. Conquest Mining is looking to raise as much as $100 million.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.392 and fell against the Japanese yen to 81.82. One UK pound fetched $1.58.

Crude oil decreased $0.37 to $81.84 a barrel for a front month contract, natural gas edged higher 0.04 cent to $3.65 per mBtu and gasoline decreased 4.05 cents to 212.50 cents.

Gold decreased $3.90 in New York trading to close at $1,350.50 per ounce, silver fell $0.009 to $23.24 per ounce and copper for the front month delivery increased 0.55 cents to $3.79 per pound.

Yield on 10-year U.S. bond was increased to 2.41% and on 30-year U.S. bond yield increased to 3.79%.