While you were sleeping: Fed sees recovery, greenback weakens, Wall St gains

Thursday 24th September 2009

The Federal Reserve said that the US economy has “picked up” and it will slow purchases of mortgage-backed securities, extending the US$1.45 trillion programme by three months to March 31.

The Fed held its benchmark interest rate at close to zero, as expected, and said rates will stay exceptionally low for an extended period.

“Conditions in financial markets have improved further, and activity in the housing sector has increased,” the Fed said in a statement. “Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”

The US dollar fell against the euro after the Fed’s statement.

The greenback strengthened to US$1.4728 per euro from $1.4790 and gained to 91.36 yen from 91.10. Japan’s currency traded at 134.57 per euro from 134.76.

US stocks eased after initially gaining on the Fed’s comments that the U.S. economy had improved though it would keep interest rates low.

The Dow Jones Industrial Average fell 0.8% to 9748.55 and the Standard & Poor’s 500 retreated 1% to 1060.87. The Nasdaq Composite declined 0.7% to 2131.42.

AT&T Inc. climbed 2.4% to US$27.13, the biggest gain on the Dow. Chipmaker Intel Corp. rose 1.7% to US$19.87 and Verizon Communications rose 1.3% to US$29.88. JPMorgan Chase & Co. sank 3% to US$45.06, leading the Dow lower, after the Fed said financial markets have recovered.

General Mills rose 4.6% to US$63.80 after posting earnings that beat estimates.

European shares rose before the Fed’s statement, led by advancing bank stocks. The Dow Jones Stoxx 600 Index gained 0.2% to 244.74.

European manufacturing and services grew for a second month in September, providing evidence that the region’s economy may be climbing out of its slump.

A composite index of manufacturing and services rose to 50.8 from 50.4 in August, according to Markit Economics. A reading above 50 indicates expansion.

Among regional benchmarks, the UK’s FTSE 100 fell 0.1% to 5139.37, Germany’s DAX 30 declined 0.1% to 5702.05 and France’s CAC 40 slipped 0.1% to 3821.79.

Standard Chartered gained 4.3% and BNP Paribas rose 1.2%.

Liberty International tumbled 10% after announcing a placement of 56 million shares.

Royal Dutch Shell fell 1.6%, BP Plc fell 1.5% and Total SA declined 1.4% after the price of crude oil fell.

US crude tumbled 3.6% to US$69.12 a barrel on the New York Mercantile Exchange after the US Energy Information Administration said commercial stockpiles of oil unexpectedly rose 2.8 million barrels last week. Inventories of gasoline rose by 5.4 million barrels to 213.1 million barrels.

Copper fell for the first time in three sessions as stockpiles monitored by the London Metal Exchange rose by 175 metric tons to 331,950 metric tons, the highest since May.

Copper for December delivery fell 3.2% to US$2.772 a pound on the New York Mercantile Exchange.

Gold futures for December delivery shed 0.1% to US$1,014.70 an ounce in New York.

President Barack Obama, in his first address to the United Nations General Assembly, called for “a new era of engagement based on mutual interest and respect” and signaled he was breaking from policies associated with former President George W. Bush.

He urged other nations to abandon what he called an “almost reflexive anti-Americanism” and called for cooperation on climate change, restoring economic growth and halting the spread of nuclear weapons.

International Monetary Fund Managing Director Dominique Strauss-Kahn said leader of the Group of 20 nations need to press on with efforts to restore global economic growth because the slump hasn’t yet run its course.

“This recovery will be rather sluggish, at an average lower than growth we had before the crisis,” Strauss-Kahn told Bloomberg ahead of the G-20 summit in Pittsburgh. “It’s too early to say the crisis is behind us.”

Businesswire.co.nz

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