Who’s afraid of the Federal Reserve? Not Wall Street, it seems, nor investors in other markets such as Australia as the rally in shares continues, despite the growing belief the US central bank will lift its key interest rate at meetings next month, or in July.
US traders are now pricing in a 38% for a rate hike in June and 45% in July, according to Reuters. The strength in stocks, especially on Wall Street has been surprising given the weakness of first quarter earnings reports, the slide in retail stocks, especially department stores and apparel groups.
One stock stood out on Wall Street – Tiffany’s, the luxury productions retailer produced a weak first quarter report and the shares slid 6% early on, but recovered to end slightly higher.
Wall Street’s confidence rubbed off on trading in Asia and Europe overnight (the latter was helped by the sensible terms of the latest bailout of Greece).
In Australia the overnight trading session in the ASX 200 future market saw a 30 point gain – less than half the size of the rise the day before which translated into a 1.4%, 79 point gain for the ASX 200.
The Aussie dollar was trading around 72 US cents this morning, USgold futures fell for another session to be trading a round $US1,227 an ounce, and oil bounced to within sight of $US50 a barrel in New York and London after a report showing a run down in US stocks of crude.
July West Texas Intermediate crude futures jumped 1.9%, to settle at $US49.56 a barrel in New York — the highest since Oct. 9. In London, July Brent crude futures rose 2.3%, to $US49.74 a barrel.
On Wall Street stocks rose for a second straight session overnight, with the S&P 500 posting its highest close in nearly a month on the back of a rally in energy shares (which chased oil futures prices higher).
The S&P 500 rose 14.48 points, or 0.7%, to end at 2,090.54, its highest close since April 27; the Dow added 145.46 points, or 0.8%, to close at 17,851.51, and the Nasdaq Composite closed up 33.84 points, or 0.7%, to finish at 4,894.89.
According to Marketwatch.com “ combination of stronger crude prices and mounting expectations that the Federal Reserve will raise interest rates this summer helped buoy sentiment, said Kristina Hooper, U.S. investment strategist for Allianz Global Investors.
“The market seems to be embracing the greater likelihood of a Fed rate hike in June, viewing the possibility of it as a vote of confidence for the American economy,” she said.”
