Australian twenty dollar notes
A sheet of uncut Australian twenty dollar notes are displayed at the Reserve Bank of Australia in Sydney, October 28, 2008. Reuters/Tim Wimborne
  • The US Federal Reserve kept interest rates on hold, but left the door open for a rate hike later this year. The two conditions that the Fed would require to raise rates were on track to be met - inflation and jobs. The statement from the Fed upgraded its view on the labour market " On balance, a range of labor market indicators suggest that underutilization of labor resources has diminished since early this year". In addition the Fed seemed reasonably confident that inflation would head back to its target band of 2% over the medium term.
  • In US economic data, pending home sales fell by 1.8% in June against expectations for a 1% lift.
  • European shares rose on Wednesday, lifted by strong earnings results and takeover activity. The FTSEurofirst 300 rose by 1% with the German Dax also up by 0.3% while the UK FTSE was higher by 1.2%. In London trade mining shares were higher with BHP Billiton up by 2.1% and Rio Tinto up by 2%.
  • US sharemarkets rallied on Wednesday after the US Federal Reserve left its key interest rate unchanged and highlighted the improvement across the economy. All 10 major S&P 500 sectors were higher, with the telecom sector leading the gains, up 1.4%. The Dow Jones rose by 121 points or 0.7% with the S&P 500 up by 0.7% while the Nasdaq gained almost 23 points or 0.4%. After the close Facebook reported better than expected results however the headwinds of the stronger US dollar on international earnings resulted in the stock down 2% in after hours trade.
  • US treasury prices fell on Wednesday (yields higher) as the FOMC statement raised expectations of a September rate hike. US 2 year yields rose by 3 points to 0.71% while US 10 year yields rose by 3 points to 2.29%.
  • Major currencies were weaker against the greenback in European and US trade. The euro fell from highs near US$1.1065 to lows near US$1.0970 and ended US trade at US$1.0985. The Aussie dollar fell from highs near US73.35c to lows around US72.85c and ended US trade near US72.95c. And the Japanese yen traded between 123.50 yen per US dollar to JPY124.00, ending US trade around JPY123.90.
  • World oil prices were rose on Wednesday as a sharper than expected drop in US crude stockpiles supported buying. US crude inventories fell by 4.2 million barrels last week, against expectations of a 184,000 barrel drop. Brent crude rose by US8cc or 0.2% to US$53.38 a barrel while US Nymex crude rose by US81c or 1.7% to US$48.79 a barrel.
  • Base metal prices were mostly higher on the London Metal Exchange on Wednesday, with the exception of Nickel (down 0.7%) and Zinc down (0.3%). Other metals lifted between 0.1%-0.6%. The Comex gold futures price fell by US$3.60 to US$1,092.60 per ounce. Iron ore rose by US$3.10 or 5.6% to US$55.30 a tonne on Wednesday.

Ahead: In Australia, building approvals and international trade prices are released. The Reserve Bank Governor delivers a speech in Sydney. In the US, the June quarter GDP is released.

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