Short covering by speculators in the oil market and the start of the two meeting of the US Fed’s key policy committee helped settle nervy markets ahead of tomorrow morning’s announcement of the decision.
For us in Australia it means the ASX will start in the green with a gain of more than 50 points pencilled for the start at 10 am.
Don’t be surprised if the market surges in what will be a big relief rally to match the ones we saw in Europe and the US as oil prices halted their remorseless slide and rose, however briefly.
Investors clearly wanted a breather, speculators covered some of their short positions in oil and energy stocks, and markets reversed (but not in gold, copper and other commodities which again eased).
Now everyone waits to see if the Fed will lift its key interest rate for the first time in more than 9 years early tomorrow, Sydney time (around 6am).
That was after the ASX 200 lost 0.4% yesterday to close at a two and a half year low of 4,909.6 (it was last at this level in July, 2013).
Commodity prices rose – oil touched 11 year lows in late Asian and early European trading, then reversed and climbed by 2% to 3%.
Iron ore prices wet against the trend overnight and had a second day of gains, up 0.8% to $US39.36 a tonne.
The key development overnight was a rise in the price of oil – and a dip in the value of the greenback – our currency eased under 72 US cents this morning to trade around 71.90.
RBA governor, Glenn Stevens gave his now usual end of year interview to the Financial Review and unlike a year ago when he nominated an Australian dollar target of 75 US cents, Mr Stevens avoided mentioning any value in his comments.
Markets in Europe and then the US rose strongly overnight as the Fed’s Open Markets Committee met and oil prices reversed themselves and rose sharply.
The Dow ended up 260 points or 1.5%, the S&P 500 was up 1.5% and Nasdaq rose 1.2%.
US oil futures rose 2.9% to $US37.35 and Brent crude was up 0.9% at $US38.27.
Gold was off around 0.2% at $US1,041 an ounce on Comex in New York and Comex copper lost 5.50 cents to $US2.05 a pound and looking weak.
European sharemarkets rose sharply – many by 2% or more and the Stoxx 600 index ended the day up 2.1%
