Sharechat Logo

While you were sleeping: Easy money hopes fade

Wednesday 4th April 2012

Text too small?

Minutes from last month's US Federal Reserve meeting quashed hopes for a fresh liquidity boost from monetary policy makers, lowering the appeal of equities and bonds alike.

"A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate consistent rate of 2 percent over the medium run," the FOMC minutes from the March 13 meeting showed as they were released today.

That diminished investors' hopes the Fed might add more stimulus measures to their promise of keeping interest rates at current lows until late 2014.

In early afternoon trading in New York, the Dow Jones Industrial Average dropped 0.82 percent, the Standard & Poor's 500 Index shed 0.81 percent and the Nasdaq Composite Index fell 0.51 percent.

"No more of that artificial sweetener that the markets have become so accustomed to getting a regular dose of," Peter Kenny, managing director of Knight Capital in Jersey City, New Jersey, told Reuters. "At this stage of the game, people realise the markets are going to have to do the work now."

US Treasuries also declined, pushing the yield on the benchmark 10-year note six basis points higher to 2.25 percent at 2.13pm New York time, according to Bloomberg Bond Trader prices. It earlier fell as much as three basis points.

"The market was looking for QE3,” William Larkin, a fixed-income money manager at Cabot Money Management in Salem, Massachusetts, told Bloomberg. “They are saying that the recovery is on track. They are moving to more neutral, from more dovish. The market is going to be supersensitive to Fed policy because a lot of people believe the Fed is behind the curve.”

Data released today included new orders for manufactured goods, which advanced 1.3 percent in February, short of the 1.5 percent advance forecast in Reuters and Bloomberg surveys.

A separate report showed that US car sales climbed more than 15 percent in March.

"People are going back to work," Ford Motor economist Ellen Hughes-Cromwick told Reuters. "And the vehicle stock ... is ripe for replacement."

Sales for General Motors, however, rose only 12 percent in March, sending the stock 3.8 percent lower.

Shares of Apple received a boost as two analysts forecast the stock will hit US$1,000. It rose as high as US$632.21 earlier today.

In Europe, the Stoxx 600 Index ended the session with a 1.1 percent drop for the day. Spain's debt outlook continues to damp enthusiasm that the EU's sovereign debt crisis has been checked.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar stalls after Bascand's rate cut comments
Bascand says RBNZ will consider changing bank capital proposals
Affordable electricity key to decarbonisation - Genesis
Graeme Hart trims global packaging empire with US$615m asset sale
Stronger-than-expected inflation won't deter November rate cut - economists
Contact in talks on 13MW dairy boiler project
Restaurant Brands forecasts 10% growth in FY2020
Domestic inflation rises at fastest annual pace in eight years
16th October 2019 Morning Report
NZ dollar falls against British pound on Brexit hopes, CPI in focus

IRG See IRG research reports