While you were sleeping: Fed divided on rates

Thursday 9th April 2015

Wall Street moved higher, while US Treasuries fell after Federal Reserve minutes from last month’s meeting showed policy makers couldn’t agree over whether to raise interest rates in June.

“Several participants judged that the economic data and outlook were likely to warrant beginning normalisation at the June meeting,’ according to minutes of the March 17-18 meeting.

“However, others anticipated that the effects of energy price declines and the dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016,” the minutes showed.

In afternoon trading in New York, the Dow Jones Industrial Average advanced 0.21 percent, the Standard & Poor’s 500 Index gained 0.36 percent, while the Nasdaq Composite Index moved 0.88 percent higher. Yields on the 10 year benchmark US bond rose two basis points to 1.90 percent.

In the Dow, gains in shares of Visa and those of Nike, last up 1.3 percent and 1.2 percent respectively, outweighed declines in shares of Exxon Mobil and those of Chevron, down 1.4 percent and 1.3 percent respectively.

"Recent comments suggested that the Fed was moving more towards September or later, based off some softer economic reports,” Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Investments in Atlanta, Georgia, told Reuters. "June would come as a surprise.”

Energy stocks along with oil prices fell after US Energy Information Administration report showed the largest weekly build in oil inventories since 2001. Brent crude declined 4.5 percent and US crude dropped 5.6 percent.

"The report is very bearish with the large crude oil inventory build and the somewhat surprising rise in gasoline inventories," John Kilduff, partner at Again Capita in New York, told Reuters.

Earlier in the day, Royal Dutch Shell’s US$70 billion deal to buy BG Group had lifted energy stocks. Shares of BG closed 26.7 percent higher.

“The deal will put pressure on oil majors to act,” Aneek Haq, head of oil research at Exane BNP Paribas in London told Bloomberg. “Shell has been opportunistic, Exxon may well feel the need to follow.”

In Europe, the Stoxx 600 Index finished the session with a gain of almost 0.1 percent from the previous close. Closing at 404.66, the index touched a record 405.78 earlier in the day.

France’s CAC 40 Index slipped 0.3 percent, while the UK’s FTSE 100 Index fell 0.4 percent, and Germany’s DAX shed 0.7 percent.

BusinessDesk.co.nz

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