S&P 500 Surges Past 2,700, Wall St Holds Onto Record Gains After Fed Minutes

Australian shares are tipped to open higher today as Wall Street continued to hit fresh records.

Market snapshot at 8:10am (AEDT):

  • ASX SPI 200 futures +0.5pc at 6,059, ASX 200 (Wednesday’s close) +0.2pc at 6,0670
  • AUD: 78.4 US cents, 58 British pence, 65.24 Euro cents, 88.15 Japanese yen, $NZ1.10
  • US: Dow Jones +0.4pc at 24,923, S&P 500 +0.6pc at 2,713, Nasdaq +0.8pc at 7,065
  • Europe: FTSE +0.3pc at 7,671, DAX +0.8pc at 12,978, Euro Stoxx 50 +0.6pc at 3,512
  • Commodities: Brent crude +2pc at $US67.88/barrel, spot gold -0.3pc at $US1,314/ounce, iron ore +0.3pc at $US74.97/tonne

Energy was the best performing sector in the US, following an overnight surge in oil prices.

Brent crude oil surged to its highest level in 2.5 years, as anti-government protests continue in Iran, one of the world’s major largest producers.

Once again, the technology sector was another the stand-out performer, boosted by shares in IBM, Oracle and chipmakers.

The Nasdaq Composite surged by 0.8 per cent, while the Dow Jones Industrial Average lifted by 0.4 per cent.

In addition, the S&P 500 crossed the 2,700 points mark for the first time, after advancing 0.6 per cent.

Fed expects Trump tax cuts to boost spending

The release of the US Federal Reserve’s December meeting minutes at 6.00am (AEDT) did not have a significant impact on US share trading.

According to the minutes, the Fed policymakers were concerned about persistently low inflation, and saw the recent Trump tax cuts as a means to boost to consumer spending.

The new tax laws slash the corporate rate from 35 to 21 per cent, and temporarily cuts the taxes paid by most US taxpayers.

The details of the meeting — at which the Fed raised interest rates for the fifth time since the global financial crisis — also showed that officials were uncertain about the impact of fiscal stimulus on raising price pressures.

“Most participants reiterated their support for continuing a gradual approach to raising the target range,” the Fed said in the minutes.

In other words, most of them are in favour of gradually lifting US interest rates from its current 1.25-1.5 per cent band.

The Fed also said “this approach helped to balance risks to the outlook for economic activity and inflation”.

Furthermore, the US central bankers considered the possibility that the Trump administration’s tax cuts, or easy financial conditions, could cause inflation pressures to build unduly.

At the same time, they also considered that actual or expected inflation may fail to rise to the Fed’s 2 per cent target.

In the minutes, many policymakers “expected the proposed cuts in personal taxes to provide some boost to consumer spending” and many characterised the changes in business taxes as likely to provide a modest boost to capital spending.

Australian market today

The local share market is expected to begin the day higher, given ASX futures have risen by 25 points.

Although the Fed minutes knocked some wind out of the Australian dollar, it managed to regain its footing rather quickly.

Within an hour, the Australian dollar rose slightly against the greenback — back to 78.4 US cents.

It has also lifted against the British pound (+0.7pc), euro (+0.5pc), Japanese yen (+0.3pc) and New Zealand dollar (+0.2pc).

Gold, however, was the biggest loser ahead of the Fed minutes being released — it has since dropped 0.2 per cent to $US 1,315 per ounce.