Global Stocks Rally; Fed On Hold

123jump.com Staff
28 Jan, 2009
New York City

The U.S. Fed left its key lending rate range unchanged near zero and indicated its preparedness to buy U.S. Treasuries. The move may be designed to allow the administration and the U.S. Congress to create more budget deficit spending.

[R]5:00PM New York – 11:00PM Frankfurt, 4:00AM Sydney – The U.S. Fed left its key lending rate range unchanged near zero and indicated its preparedness to buy U.S. Treasuries. The move may be designed to allow the administration and the U.S. Congress to create more budget deficit spending.[/R]

The U.S. Federal Reserve left its key lending rate range unchanged between zero and 0.25% and “indicated that exceptionally low levels of federal funds rate for some time.”

The Fed continues to purchase large amount of agency debt that are linked to housing market to provide liquidity for mortgage lending. The statement released by the Federal Open Market Committee indicated that the Fed is prepared to purchase long term Treasury securities if that will improve conditions in the private market.

The accompanying statement also noted that the Committee expects the inflation pressures will remain subdued in coming quarters.

The Fed action and view on the inflation lifted financial stocks and broader market in New York trading. The U.S. House is expected to vote on $816 billion stimulus plan today and the Obama administration is likely to propose a plan that involves setting up a “bad bank” to segregate bad loans from the balance sheet of large banks.

Legg Mason and Calamos Asset Management fell after reporting losses. Citigroup jumped on the speculation that its Japanese brokerage unit may be sold to Mizuho Financial Group. Tyco Electronics fell on a quarterly loss. Tidewater Inc rose on 31% rise in earnings.

Financial stocks lead a rally in London rally on the hopes that the U.S. stimulus plan will provide additional liquidity in the world financial system. British Sky Broadcasting interim profit increases 26% to £388 million.

The Sensex index in India added nearly 3% for the second day in a row on short covering ahead of expiry of January derivative contracts. Tata Motors gained after UK offered loan guarantees for its UK luxury car operations Jaguar and Land Rover. India to lower petrol, diesel and gas prices effective tomorrow.

Stocks in Tokyo trading gained 0.6% on the expectations that the U.S. stimulus plan will be passed. Panasonic is expected to reported first loss in six years. Sumitomo Mitsui Financial Group net dropped nearly 70% in the nine months ending in December.

Australia stocks rose 1.5% after commodity and financial stocks gained on expectations that the Reserve Bank of Australia will cut interest rates as consumer prices drop. In the December quarter, consumer price index fell 0.3%. Woolworth second quarter sales rise 8.1% to A$13.3 billion.


American Markets Reviews

Dow Jones Industrial Average increased 200.72 or 2.46% to a close of 8,375.45, S&P 500 rose 28.38 or 3.4% to 874.09, and Nasdaq Composite Index increased 53.44 or 3.6% to a close of 1,558.34. In Toronto TSX Composite increased 146.60 or 1.7% to close at 8,906.23.

In Latin American trading Brazil Bovespa Index increased 4% or 1,528.53 to 40,227.45 and Mexico Bolsa Index edged higher 2.7% or 529.07 to 20,145.22.

Argentina rose 2.4%, Chile increased 1.2%, Peru gained 1.2% and Colombia edged higher 1.24%. Venezuela edged down 0.7%.

U.S. Stock Movers

Of the stocks in S&P 500 index, 427 increased, 72 declined and 1was unchanged.

Legg Mason Inc led decliners in the S&P 500 index with a loss of 10% followed losses in Tyco Electronics with a loss of 8.3%, in Tellabs Inc of 6.1%, in Becton Dickinson of 5.1% and in Qwest Communication of 4.9%.

State Street Corp led gainers in the S&P 500 index with a rise of 32% followed by increase in Fifth Third Bancorp of 27%, in Wells Fargo & Company of 25.4%, in Huntington Banc of 24.6% and Prudential Financial of 22.4%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 45.22 or 0.56% to 8,106.29. ASX 200 index in Australia increased 51.50 or 1.50% closed to 3,495.50. The KL Composite index in Malaysia higher 6.94 or 0.80% closed to 879.63.Markets of Hong Kong and China were closed today.

The Kospi Index in South Korea increased 64.58 or 5.91% to close at 1,157.98. SET index in Thailand closed higher 3.56 or 0.80% to 448.35 and JSE Index in Indonesia decreased 15.18 or 1.14% closed to 1,321.45. The Sensex index in India increased 253.39 or 2.81% closed to 9,257.47.

Europe Markets Review

In London FTSE 100 Index closed higher 100.79 or 2.40% to 4,295.20, in Paris CAC 40 Index increased 121.48 or 4.11% to close at 3,076.01 and in Frankfurt DAX index higher 195.30 or 4.52% to close at 4,518.72. In Zurich trading SMI increased 69.02 or 1.29% to close at 5,417.93.

Commodities, Bonds and Currencies

Yields on 10-year bond increased to 2.65% and on 30-year bonds increased to 3.41%.

The U.S. dollar rose to $1.3138 to a euro and against the Japanese yen rose to 90.41 yen.

Immediate futures prices of Texas crude oil increased to $0.67 to $42.25 a barrel, for natural gas decrease 1 cent to $4.44 per mbtu and gasoline prices increased 5.26 cents to 119.50 cents a gallon.

Futures of corn increased 7.00 cent to $3.84, soybean gained 6.50 cents to $9.82, sugar decreased 0.04 cents to 12.87 a pound and wheat increased 11 cent to $6.26 a bushel.

In metals trading, copper prices rose 0.40 cents to $1.48850 a pound, gold decreased $12.50 to $887.00 per ounce and silver decreased 21 cents to $11.95.