Scoreboard: Fed fillip

The US Federal Reserve left interest rate settings unchanged with the federal funds target range at zero to 0.25 per cent and decided to wind back asset purchases from $25 billion to $15 billion a month. The Fed retained its key statement “that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program”.

In US economic data, consumer prices fell by 0.2 per cent in August. Excluding food and energy, prices were unchanged. Both results were below market forecasts. The NAHB housing market index rose from 55 to 59 in September, above forecasts.

European shares were mixed on Wednesday ahead of the US Federal Reserve interest rate decision and the vote on Scottish independence. The FTSEurofirst 300 index rose by 0.4 per cent with the German Dax up by 0.3 per cent while the UK FTSE fell by 0.2 per cent. Australia’s major miners were mixed in London trade with shares in BHP Billiton down by 1.0 per cent and Rio Tinto was up by 0.2 per cent.

US sharemarkets were volatile on the announcement of the Fed decision. The Dow Jones index swung in a 132 point range. But investors were comforted that there was no change in the rate outlook. The Dow Jones index rose by 25 points or 0.2 per cent to record highs. The broader S&P 500 index lifted by 0.1 per cent while the Nasdaq gained 9 points or 0.2 per cent.

US treasury prices fell on Wednesday (yields higher) as analysts interpreted greater confidence from the Federal Reserve chair in her appearance at the press conference. US two-year yields rose by 3 points to 0.569 per cent while US 10-year yields rose by 2 points to 2.614 per cent.

Major currencies gyrated in response to the Fed decision but ended the US session weaker against the greenback. The euro fell from highs near $US1.2980 to $US1.2850, before ending US trade around $US1.2875. The Australian dollar fell from highs near US90.85c to lows around US89.50c before ending the US session near US89.60c. And the Japanese yen eased from 107.16 yen per US dollar to ¥108.38, ending US trade near ¥108.30.

World oil prices eased on Wednesday. A stronger US dollar weakened the purchasing power of commodity buyers in Asia and Europe. And weekly data showed that US crude stocks rose sharply by 3.7 million barrels in the latest week. But disruptions to oil supplies in Libya and Nigeria supported oil prices. Brent crude fell by US8 cents to $US98.97 a barrel with the US Nymex price down by US46c a barrel or 0.5 per cent to $US94.42 a barrel.

Base metal prices fell by up to 1.4 per cent on Thursday with aluminium leading the declines. But copper bucked the trend, up by 0.4 per cent. Gold fell on Wednesday. The Comex gold futures quote fell by US80c to $US1,235.90 per ounce. And spot gold was around $US1,223 after the Fed decision. Iron ore fell by US30c or 0.4 per cent on Wednesday to $US84.20 a tonne.

Ahead: In Australia, detailed employment data is released including jobs by industry. In the US, the data on weekly jobless claims is released.

Craig James is chief economist at Commsec.