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• The US Federal Reserve increased its target range for the Federal Funds rate by 75 basis points (three-quarters of a percent) to 1.50%- 1.75%, the biggest rate hike since November 1994.
• In US economic data, retail sales fell by 0.3% in May (survey: +0.2%). Import prices lifted 0.6% in May (survey: +1.1%) with export prices 2.8% higher (survey: +1.3%). Business inventories rose by 1.2% in April (survey: +1.2%). The NAHB housing market index eased from 69 to 67 in June (survey: 67). The Empire State manufacturing index rose from -11.6 to -1.2 in June (survey: +3). MBA mortgage applications rose by 6.6% in the past week.
• European sharemarkets rose on Wednesday. After an unscheduled meeting, the European Central Bank said it would skew reinvestments of maturing debt to help more indebted euro zone members and would devise a new instrument to stop a fragmentation of the bloc’s bond market. The pan-European STOXX 600 index rose by 1.4%, the first lift in seven days. The German Dax index rose by 1.4% and the UK FTSE index rose by 1.2%. In London trade, shares of Rio Tinto rose 1.4% with BHP up 1.7%.
• US sharemarkets were firmer on Wednesday after the Federal Reserve chair expressed optimism for a soft landing for the economy. Banks rose 1.6%. Shares in Boeing rose 9.5% on hopes that the aircraft maker’s 737 MAX plane may return to Chinese skies. The Dow Jones index rose 304 points or 1.0%. The S&P 500 index rose 1.5%. And the Nasdaq index rose 271 points or 2.5%.
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• US treasuries rose on Wednesday (yields lower). US 10-year yields fell by 19 points to near 3.29%. And US 2-year yields fell by 22 points to near 3.22%.
• Major currencies were mixed against the US dollar in European and US trade. The Euro eased from highs near US$1.0505 to lows near US$1.0360 and lifted to near US$1.0450 at the US close. The Aussie dollar rose from highs near US68.90 cents to highs near US70.25 cents and was near US70.00 cents at the US close. The Japanese yen lifted from near 134.90 yen per US dollar to JPY133.55 and was near its JPY133.72 at the US close.
• Global oil prices fell by 2-3% on Wednesday on fears that the large US rate hike would slow economic activity and therefore demand for oil. The Brent crude price fell by US$2.66 or 2.2% to US$118.51 a barrel. And the US Nymex crude price fell by US$3.62 or 3.0% to US$115.31 a barrel.
• Base metal prices rose by as much as 4.2% on Wednesday with tin up the most although copper rose just 0.1%.
• The gold futures price rose by US$6.10 or 0.3% to US$1,819.60 an ounce. Spot gold was trading near US$1,835 an ounce at the US close. The iron ore futures price fell by US$2.79 or 2.0% to US$135.47 a tonne. Ahead: In Australia, labour force data is issued with the Reserve Bank Bulletin. Chinese new home prices data is due. In the US, jobless claims and housing data are released with the Philadelphia Fed manufacturing index. The Bank of England hands down its interest rate decision.
Published by CommSec
