Fed Left Rates, Bond Program Unchanged

Bikram Pandey
14 Dec, 2010
New York City

Federal Reserve left its target rate range on hold and left its U.S. bonds buying program intact. The Fed noted that slow economic recovery is insufficient to lower unemployment. Stocks turned after the expected rate decision. Best Buy Co plunged after the retailer guided weak outlook.

[R]4:10 PM New York – Federal Reserve left its target rate range on hold and left its U.S. bonds buying program intact. The Fed noted that slow economic recovery is insufficient to lower unemployment. Stocks turned after the expected rate decision. Best Buy Co plunged after the retailer guided weak outlook.[/R]

U.S. stocks turned positive after the Fed decision. The Fed’s rate setting committee left the target rate range on hold and kept intact $600 billion bond buying program. The Fed statement noted the slow recovery in the economy and said that it is “insufficient to bring down unemployment.”

Fed left its target rate range for the federal funds rate between zero and 0.25%, the same for the last two years.

Earlier in the day stocks gyrated retail sales and PPI rose more than anticipated in November. HCP agreed to acquire real estate assets of HCR ManorCare for $6.1 billion. Regal Beloit agreed to acquire electric motor division of A.O. Smith for $875 million.

Best Buy Co plunged 8% after it reported third quarter revenue decreased 1.1% to $11.89 billion and guided lower than expected earnings for the year. Investors feared that the slower than expected sales may indicate a weakness in holiday sales.

The European indexes fell after euro area industrial production improved in October. Italian Prime Minister Silvio Berlusconi narrowly won vote of confidence. German manufacturing employment declined but investor confidence improved. French inflation remained flat in November.

The UK indexes edged higher tracking rising commodities prices. The UK inflation soared and home price index improved in November. BP agreed to sell Pakistan assets to China based United Energy Group for $775 million. Imagination Technologies net surges 93%.

Tokyo stocks rose for the second day led by brokerages and financial companies. Japan proposes to cut corporate tax rates for the next fiscal year by 5%. Marubeni Corp plans to double its global water assets in two years. Toyota recalls 94,000 Sienna minivans in the U.S.

Stocks in China region edged higher but resource stocks fell. Banks also edged lower after China lifted bank reserve ratios of six select banks by 50 basis points to 19%. Premier Wen Jiabao is scheduled to reach India on Wednesday with the largest ever trade delegation.

Mumbai stocks traded sideways after the latest read on wholesale inflation showed a decline to 11-month low. India selects 37 companies to build solar power projects to reach its target of 20 gigawatts by 2022. Reserve Bank of India injects liquidity for the third time in as many months.

Allahabad Bank hiked base and prime lending rate. Honda Motors partner in Hero Honda Group are expected to acquire 26% stake in the joint venture for about $1 billion. Punjab National Bank bought 63.6% stake in Kazakhstan based JSC Dana Bank in $24 million.

Australian banks traded lower as the Senate inquiry focuses on the competition in the sector and the viability of small banks. The benchmark index edged higher. Spanish food giant EBRO makes a hostile bid for SunRice. Housing starts drops substantially in the September quarter.

Commodities, Currencies and Yields

Dollar edged up against euro to $1.337 and rose against the Japanese yen to 83.71. One UK pound fetched $1.577.

Crude oil decreased $0.52 to $88.09 a barrel for a front month contract, natural gas edged lower 16 cent to $4.25 per mBtu and gasoline decreased 2.50 cents to 229.25 cents.

Gold increased $1.70 in New York trading to close at $1,396.30 per ounce, silver decreased $0.03 to $29.59 per ounce and copper for the front month delivery decreased 1.1 cents to $4.19 per pound.

Yield on 10-year U.S. bond increased to 3.47% and on 30-year U.S. bond yield was rose to 4.54%.