Scoreboard: Rates reassurance

Wall Street ended mixed after the Federal Reserve reduced its monthly asset purchases and confirmed rates would stay low for a considerable time.

The US Federal Reserve has reduced monthly asset purchases from $35 billion to $25bn. The Fed noted that there was still "significant underutilisation of labour resources." And it further confirmed rates would stay low for a "considerable time after the asset purchase program ends."

The US economy grew at a 4 per cent annual rate in the June quarter, above forecasts tipping a 2.9 per cent gain. The ADP employment report indicated that 218,000 private sector jobs were created in July, short of forecasts tipping a 230,000 gain.

European shares fell on Wednesday in response to worse-than-expected earnings from major companies. However the strong US economic data provided support for investor sentiment. The FTSEurofirst 300 index fell by 0.5 per cent with the German Dax down by 0.6 per cent while the UK FTSE lost 0.5 per cent. Australia's major miners were lower in London trade with shares in BHP Billiton down by 2.3 per cent while Rio Tinto fell by 1.2 per cent.

US sharemarkets were mixed on Wednesday. The Dow Jones index fell by almost 32 points or 0.2 per cent with the S&P 500 index up by less than 0.1 per cent while the Nasdaq lifted by 20 points or 0.5 per cent assisted by biotechnology and social media stocks.

US treasury prices fell on Wednesday in response to the strong economic growth result. US 2-year yields rose by 2 points to 0.563 per cent while US 10-year yields were up by 9 points to 2.556 per cent.

Major currencies fell against the US dollar on Wednesday after the US economic growth result but recovered some ground after the Federal Reserve decision. The euro fell from highs near $US1.3410 to $US1.3365, before ending US trade near $US1.3395. The Aussie dollar fell from highs near US93.85c to lows near US93.10c before ending the US session near US93.25c. And the Japanese yen eased from 102.06 yen per US dollar to JPY103.04, ending US trade near JPY102.85.

World oil prices fell on Wednesday as investors fretted about plentiful market supplies and soft global demand for crude. Brent crude fell by $US1.21 or 1.1 per cent to $US106.51 a barrel and the US Nymex price fell by US70 cents a barrel to $US100.27 a barrel. Nymex had lifted earlier in the session in response to data showing an increase in US crude stocks in the latest week.

Base metal prices rose by up to 2.3 per cent on Wednesday with aluminium posting the biggest increase followed by nickel. But lead bucked the trend, down by 0.1 per cent. Gold prices eased on Wednesday after strong economic data boosted the greenback. The Comex gold futures price was down by $US3.40 an ounce to $US1,294.90 per ounce. Iron ore rose by US60c a tonne to $US95.90 a tonne.

Ahead: In Australia, data on import and export prices, private sector credit and building approvals are released. In the US, weekly data on claims for unemployment is released together with the employment cost index and the Chicago purchasing managers index. 

Craig James is chief economist at Commsec.

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