Scoreboard: Fed watch

Wall Street rebounded overnight ahead of the Fed's interest rate decision, while the Australian dollar made gains.

In US economic data, producer prices were unchanged in August. Excluding food and energy, prices were up 0.1 per cent. Producer prices are up 1.8 per cent on a year ago. Chain store sales were up 3.6 per cent on a year ago, down from the 4.9 per cent annual gain in the previous week.

European shares were modestly lower on Tuesday as investors awaited the US Federal Reserve interest rate decision and the vote on Scottish independence. The FTSEurofirst 300 index fell by 0.2 per cent with the German Dax down 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 0.3 per cent and Rio Tinto was down 0.1 per cent.

US sharemarkets posted solid gains on Tuesday as some investors bet that the Federal Reserve will remain cautious about when the process of increasing interest rates will start in 2015. The Dow Jones index rose by 101 points, or 0.6 per cent, to finish just short of record highs. The broader S&P 500 index lifted by 0.8 per cent while the Nasdaq gained 34 points or 0.8 per cent.

US treasury prices rose slightly on Tuesday (yields lower) ahead of the Federal Reserve interest rate decision. US two-year yields fell by one point to 0.54 per cent while US 10-year yields fell by one point to 2.594 per cent.

Major currencies were generally firmer against the greenback over the European and US sessions on Tuesday on rumours that the Chinese central bank will boost stimulus to the top five banks. The euro rose from lows near $US1.2925 to $US1.2990, before ending US trade near $US1.2960. The Australian dollar rose from lows near US90c to highs around US91.10c before ending the US session near US90.95c. And the Japanese yen held between ¥106.83 per US dollar and ¥107.32, ending US trade near ¥107.15.

World oil prices rose on Tuesday. A weaker US dollar boosted the purchasing power of commodity buyers in Asia and Europe. And OPEC Secretary General Abdallah El-Badri told reporters he expected the group to lower its oil output target to 29.5 million barrels per day (bpd) from 30 million bpd when it meets next in late November. Brent crude rose by $US1.17 or 1.2 per cent to $US99.05 a barrel with the US Nymex price up by $US1.96 a barrel or 2.1 per cent to $US94.88 a barrel.

Base metal prices rose between 0.3-1.9 per cent on Tuesday, with aluminium up the most and nickel up the least. Gold prices rose for the second straight day on Tuesday with the Comex gold futures quote higher by $US1.60 an ounce or 0.1 per cent to $US1,236.70 per ounce. Iron ore fell by US70c on Tuesday to $US84.50 a tonne after rising up $US3.20, or 3.8 per cent on Monday.

Ahead: In Australia, no major economic data is released. In the US, the Federal Open Market Committee hands down the interest rate decision. Data on consumer prices and the current account are released with the NAHB Housing Market index.

Craig James is chief economist at Commsec.

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