While you were sleeping: Markets edge higher

Thursday 17th December 2015

Wall Street moved higher, though pared some of its earlier gains because oil slid, as investors anticipated a decision by US Federal Reserve policy makers to increase their target interest rate for the first time in nearly a decade.

The Fed will announce its rate decision at 2pm Washington time, while Chair Janet Yellen will speak at a at a news conference at 2.30pm.

“Far and away, the most important takeaway from the Fed meeting is their expectations of the velocity of the rate rise," Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York, told Reuters. "I know that they don't have a crystal ball, but I want to get a better expectation for how quickly they expect to raise rates."

Wall Street moved higher in midday trading. In 12.12pm trading in New York, the Dow Jones Industrial Average gained 0.2 percent. In 11.56am trading, the Standard & Poor’s 500 Index added 0.3 percent, while the Nasdaq Composite Index also increased 0.3 percent.

“The real impact on today’s decision happened in the last seven, eight days,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany, told Bloomberg. “Investors will listen very carefully to the wording from the Fed. What investors want to hear is that the US economy is in good shape and that the speed of further rate hikes will be very gradual.”

The latest data showed further strength in the US housing market. Housing starts rallied 10.5 percent to an annualised pace of 1.17 million units in November, while building permits rose more than expected, climbing 11 percent to a 1.29 million-unit rate, the highest level since June.

Separately, industrial production slid 0.6 percent in November.

"The headwinds remain strong in the manufacturing sector, but the Fed right now is more focused on the strong consumer spending and housing data, which means they will go ahead with a rate hike today," Thomas Costerg, a US economist at Standard Chartered Bank in New York, told Reuters.

In the Dow, gains in shares of Verizon and those of Merck, last up 1.4 percent and 1.2 percent respectively, outweighed declines in shares of DuPont and those of Apple, last trading 2.7 percent and 1.2 percent weaker.

Shares of Chevron and Exxon Mobil slid, down 1.2 percent and 1 percent respectively, with the price of oil after a US Energy Information Administration report showed crude inventories unexpectedly rose, climbing 4.8 million barrels last week.

"Only the staunchest contrarian could derive anything bullish out of that report," Peter Donovan, broker at Liquidity Energy in New York, told Reuters. "The actual numbers were more bearish than all expectations, as well as more bearish than the API report released last night.”

In Europe, the Stoxx 600 Index ended the day with a 0.2 percent advance from the previous close. Germany’s DAX Index rose 0.2 percent, while France’s CAC 40 Index also increased 0.2 percent, and the UK’s FTSE 100 Index added 0.7 percent.

BusinessDesk.co.nz

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