Wednesday 1 August 2012

USA

Federal Reserve statement on Jun 2012 FOMC meeting

The Federal Reserve released a statement on the US economy, based on the Federal Open Market Committee meeting in Jun 2012. Some extracts include:

  • State of the economy
    Economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.
  • Expectations
    The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
  • Policy response
    • Interest rates: “the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
    • Maturities: “The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.

Commodities

  • Gold Futures (Aug): $1,607/oz, down $7.30 from $1,611/oz
  • Oil Futures (WTI LSC Sep – NY trading): $88.91/barrel, up $0.85 from $88.06/barrel

Treasury yields

  • 30-year: 2.60%, up 5 points from 2.55%
  • 10-year: 1.52%, up 5 points from 1.47%
  • 5-year: 0.64%, up 5 points from 0.59%

Share market indices

Those optimistic investors who had hoped for a substantial stimulus policy (e.g. quantitative easing) from the Federal Reserve were disappointed today.

  • S+P 500: 1,378 -0.13%
  • DJIA: 12,977 -0.25%
  • NASDAQ: 2,920 -0.66%

Tech stock news

  • Facebook and Zynga reached new share price lows today on investors’ concerns about the drivers of their revenue models: users and advertising.
    • Facebook was dumped at the opening of the trading session, and closed on a low of $20.89. This is less than 55% of its $38 IPO price.
    • Zynga was dumped at the same time as Facebook, reaching a low of $2.75 in the first hour of the trading session. Zynga closed at $2.81, which is about 28% of its $10 IPO price.
  • Google Inc. is acquiring Wildfire Interactive Inc. for about $250 million plus performance incentives. Wildfire is a startup that helps companies market their wares via social media. [More]

Tech stock price movements

  • Substantial rises (more than 2.0%)
    • None
  • Substantial falls (more than 2.0%)

PORTFOLIO

Portfolio index

:-( We underperformed the market today.
:-) The USD strengthened because the Federal Reserve did not devalue the currency with a new quantitative easing program. This reduced the effect of the loss on the USD-denominated index.

Index values

  • Portfolio Index (USD): 1.077 -0.75%
  • AUD 1.00 = USD 1.0518 -0.29%
  • Portfolio Index (AUD): 1.024 -0.45%

NASDAQ

  • Apple [AAPL] $606.81 -0.64%
  • Amazon [AMZN] $232.09 -0.51%
  • Google [GOOG] $632.68 -0.04%

NYSE

  • Linkedin [LNKD] $95.64 -6.86%
  • VMware [VMW] $89.00 -1.87%