US Fed taper decision to spur ASX higher

The Australian market looks set to open higher after the Federal Reserve said it would reduce its monthly bond buying program in the new year.
Nanjing Night Net

What you need2know:SPI futures up 41 points.AUD fetching 88.49 US cents, 92.10 yen, 64.62 euro cents, 53.98 penceOn Wall St, S&P500 +1.5%, Dow Jones +1.8%, Nasdaq +1.2%In Europe, Eurostoxx +1.1%, FTSE100 +0.1%, CAC +1%, DAX +1.1%Spot gold jumps 0.3% to $US1235.50 an ounceBrent oil rises 0.9% to $US109.39 per barrelIron ore slips 0.7% to $US133.40 per tonne

What’s on today

The Reserve Bank is set to release foreign exchange transactions data for November.

Stocks to watch

JPMorgan has lowered its target price on Insurance Australia Group to $5.60 from $5.80 amid concerns about its acquisition of Wesfarmers’s insurance arm.

Deutsche Bank has a “hold” rating on REA Group which announced the resignation of its chief executive.

Currencies

The Australian dollar traded violently and briefly fell to its lowest levels in more than three years as the US Federal Reserve started a wind-back of its unprecedented stimulus program, which has supported the currency.

The local dollar fell to as low as 88.19 US cents just before the Fed’s announcement this morning, before jumping more than a cent to 89.45 US cents. It was buying 89.23 US cents about 6.30am.

Commodities

Copper has fallen, slipping further from near two-month highs hit this week. Zinc, however, touched a nine-month high after news emerged this week of a market deficit. “Zinc looks quite constructive on the charts and is poised to break out above a three-month trading range should it take out resistance at $US2010 decisively,” said analyst Edward Meir at INTL FCStone.

United States

US stocks jumped to record highs after the Federal Reserve announced a winding back of its stimulus program.

US housing starts in November surged to their highest level in nearly six years as they jumped 22.7 per cent in their biggest gain since January 1990, the Commerce Department said.

A federal judge said Facebook chief Mark Zuckerberg and dozens of banks must face a lawsuit accusing the social media company of misleading investors about its financial condition before its $US16 billion initial public offering last year.

Europe

European shares advanced on Wednesday, more than recouping the previous session’s losses. However markets closed prior to the US Fed announcement.

London’s benchmark FTSE 100 index ended the day up 0.09 per cent at 6492.08 points. Frankfurt’s DAX 30 rose 1.06 per cent to 9181.75 points and the CAC 40 in Paris climbed 1.0 per cent to 4109.51 points.

German business morale hit its highest level since April 2012 in December, the think tank Ifo reported. This was in line with expectations, but another sign that growth in Europe’s largest economy may accelerate next year.

What happened yesterday

On Wednesday, the benchmark S&P/ASX 200 Index dipped 6.2 points, or 0.1 per cent, to 5097. Telecommunications was the best-performing sector, up 0.4 per cent, as Telstra Corporation rose 0.4 per cent to $5.04. The dominant telco is refusing to reveal its asking price to sell a legacy copper network to NBN Co.

“The local market has been hurt by a string of downgrades over the past six weeks,” Morgans private client adviser Alistair McCorquodale said. “The QBE downgrade had the biggest direct impact, but downgrades from smaller companies, of which Wotif is the latest, also create uncertainty.”

Financial Review and Reuters

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