ASX poised to edge higher on dovish Federal Reserve

Stock Markets

Australian shares are poised to open higher today as shares on Wall Street leapt higher after the Federal Reserve took a dovish tilt with its latest policy statement and balance sheet plans. The Federal Reserve signaled that it may opt to maintain its balance sheet closer to its current level than previously expected. In addition, the Federal Reserve decided to hold its key interest rate steady and hinted that it could extend its interest rate-hike pause further through the year. US/China trade talks have resumed and investors are eagerly awaiting for any updates on the negotiations.

Wall Street’s main benchmarks closed well in positive territory bolstered by the Federal Reserve’s dovish policy statement. The Dow Jones, NASDAQ 100, and S&P 500 were all up overnight, with the indices gaining 434.90 (+1.77%), 175.12 (+2.64%) and 44.13 (+1.67%) points respectively.

Australian miners are expected to benefit from the overnight lift in base metal prices and the continuation of the rally in iron ore. ASX200 futures are currently up 7.0 points. 

The US Jobs report and related data for January is to be released on Friday at 8:30AM ET.

Commodities and Currencies

Brent crude prices experienced a strong rise in earlier weeks benefitting from hopes that OPEC will manage to achieve production cuts. Brent crude has continued its rally by rising 1.7% and is currently sitting at $US62.39 a barrel.

Iron ore prices continued their rally following another unfortunate tailings dam disaster at a Vale-owned mine in Brazil. Iron ore is currently up 4.9% to $US82.53 per tonne.

The spot price of gold is up $10.55 (+0.81%) and is now hovering around US$1319.45. As expected, it has broken through $US1311 and is likely to continue its strong uptrend.

The AUD is currently up 1.3% to US72.46¢ strengthened by the Federal Reserve’s signal that it could extend its interest rate-hike pause further through the year.

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via mithun.fernando@rivkin.com.au or by phoning +612 8302 3633.