The Feds expectation of resuming interest rate cuts in the expanded market remains unchanged
This is the second time that the Federal Reserve has extended its repurchase plan after the overnight repurchase rate in the US short-term financing market suddenly soared in mid-September and the shortage of the US dollar. Earlier, the Federal Reserve had announced an extension of its repurchase plan, which was scheduled to end on October 10, to November 4.
Under the plan, the Federal Reserve will restart its $60 billion monthly Treasury bond purchase program from October 15, the first expansion since 2014, to maintain the money supply at the same level or at the beginning of September this year, and the bond purchase will last at least until the second quarter of 2020.
However, the Federal Reserve explained that its new balance sheet operation was completely different from the purchase of trillions of dollars of Treasuries and mortgage-backed securities during and after the financial crisis. These bond purchases, known as quantitative easing (QE), aim to drive down long-term interest rates to stimulate lending and investment. A new round of short-term bond purchases is just to keep the money market running smoothly.
In the gloomy global economic outlook, no one wants liquidity to become a new problem affecting economic development again, which should not be a concern for investors. Ralph Axel, a strategist at Bank of America Merrill Lynch, said.
The market is not surprised. Earlier this week, Federal Reserve Chairman Powell said in response to money market financing that the Fed would announce an expansion of its balance sheet in view of recent liquidity constraints in short-term interest rate markets, but this is not quantitative easing and will not have a substantial impact on monetary policy.
Currently, the market still expects that the Fed may decide to cut interest rates again at its regular monetary policy meeting in October.
New Progress in the Separation from Europe Negotiations
When the Federal Reserve has set aside easy money for the market, in Europe on the other side of the ocean, progress in a negotiation has also eased investorsfrowns.
The European Union agreed yesterday to hold intensive consultations with Britain in an attempt to break the deadlock on Britains withdrawal from Europe.
At present, there is less than three weeks to go before the scheduled British de-European day (October 31).
But there are signs that the two sides may reach an agreement by the end of the month. British Prime Minister Johnson and Irish Prime Minister Valladka said on the 10th that they had found a possible path to an agreement. Since then, some government officials have expressed cautious optimism about reaching an agreement.
The bulls in the stock market laughed
Euro-American stock markets have stepped up, boosted by the combination of the above-mentioned good news.
At the close of Beijing time this morning, the three major U.S. stock indices rose all over the board, with the Dow rising more than 500 points, once exploring 27,000 points, and the Nasdaq and S&P 500 indices also rose nearly 2%.
As of the close of the day, the Dow rose 319.92 points to 26816.59 points, the S&P 500 index rose 1.09% to 2970.27 points, and the Nasdaq index rose more than 100 points to 8057.04 points, or 1.34%.
Technology stocks and chip stocks generally rose on the same day. Apples revenue rose 2.66% to $236.21, surpassing the record high of $233.47 set in October last year. Twitter and Facebook rose by more than 2%, while Microsoft and Amazon also rose to varying degrees. In chip stocks, Meguiar Technologies rose by more than 4%, Sales rose by more than 3%, and Broadcom and Qualcomm rose by more than 2%.
In terms of plates, the 11 major sectors of the S& P 500 index rose and fell three times. Among them, the industrial sector, the material sector and the technology sector rose by 1.97%, 1.91% and 1.49% respectively, while the public utilities sector, the real estate sector and the essential consumer goods sector fell by 0.35%, 0.29% and 0.1%, respectively.
Commenting on market performance, Edward Moya, senior market analyst at OANDA, a market analysis and research firm, said that the global trade situation had made new progress and that if optimistic news persisted in the coming weeks, U.S. stocks might show new performance.
In the foreign exchange market, the pound was pushed to a three-month high against the U.S. dollar, rising more than 3% since 10 days ago, the biggest two-day increase since the British brexit referendum in June 2016.
Oil prices rose sharply, with the futures prices of the two international benchmarks rising by more than 2% yesterday. Light crude oil futures for November delivery on the NYSE rose $1.15 to $54.70 a barrel, or 2.15 per cent. London Brent crude oil futures for December delivery rose $1.41 to $60.51 a barrel, or 2.39 per cent.
Relatively speaking, the most active December gold futures market on the New York Mercantile Exchange closed at $1488.7 an ounce, down $12.2 on the 11th from the previous day, as hedging sentiment cooled.
Source: Liable Editor of China Securities Network: Liu Song_NBJ9949