FED Rate Cut By .75 Points?
The Federal Reserve is expected to aggressively lower interest rates in its intensified battle against the credit crisis and spreading economic weakness. The question is whether all of the effort will turn the tide.
Federal Reserve Chairman Ben Bernanke and his colleagues have already been working overtime, employing a variety of novel approaches to keep the economy out of a recession or at least moderate the impact of any downturn.
And financial markets are hoping for another big boost today with an aggressive cut in the Fed's key interest rate, the federal funds rate. Expectations are for a reduction of between one-half point and a full point. If the Fed cuts the funds rate by a full point, it would be the biggest single rate cut in more than two decades.
Markets were up strongly before the Fed announcement after Lehman Brothers and Goldman Sachs reported better-than-expected results for the first quarter. The Dow Jones industrial average jumped more than 200 points in early trading.
Treasury Secretary Henry Paulson made the rounds of the morning TV shows Tuesday to underscore the administration's commitment to keeping turmoil in the financial markets from worsening a struggling economy.
'The priority we have is a stable, orderly financial' market, he said on CBS'.
Precious Metals
Gold continued to tread water mid afternoon as investors stuck to the sidelines ahead of the rate-setting meeting of the Federal Open Market Committee later today. The FOMC is widely expected to cut rates by up to a percentage point at the talks, which could send the dollar still lower against the major currencies. A softer greenback boosts gold's appeal as an alternative investment, and could send prices higher.
'Precious metals markets stabilized somewhat overnight and were confined to a fairly narrow range as anticipation was building ahead of today's Fed meeting,' said Kitco Bullion Dealers analyst Jon Nadler. 'The coming rate cut should still provide fuel for tests to higher levels.'
At 3.02 pm, spot gold was trading at 1,005.90 usd per ounce against 1,002 usd in late New York trade yesterday. Weakness in the dollar and fears over rising inflation, against which bullion is typically bought as a hedge, are currently keeping the yellow metal well-supported.
But analysts warn while investment demand remains strong, the physical side of the market, represented by buying from jewellers and other consumers, has been significantly dampened by higher prices.
According to figures released by the Bombay Bullion Association today, gold imports into India, the precious metal's biggest consumer, fell to 10 tonnes in February from 59 tonnes a year ago, analysts said.
'With prices showing no signs of cooling, March is not expected to be any better as physical buyers are not comfortable buying the yellow metal at such high prices,' said Nadler.
Meanwhile, silver was trading virtually flat at 20.14 usd per ounce against 20.24 usd. Yesterday morning, it hit a 27-year high of 21.36 usd, encouraged by gains in gold, before easing back in later trade.
Among other precious metals, platinum was trading slightly firmer at 1,988 usd per ounce against 1,972 usd after South African state power utility Eskom said it may be forced to declare force majeure over its electricity supply to South Africa's industrial users.
An electricity shortage in the country, which supplies almost 80 pct of the world's platinum, pushed the white metal to new record highs ealier this year and could crimp supply for years to come.
Crude Oil Expected Inventory
US crude oil stocks are likely to have risen last week, while distillates and motor fuel inventory probably fell, according to analysts polled by Thomson Financial News. The analysts expect weekly US Energy Information Administration inventory data, due at 2.30 pm tomorrow, will show crude stocks rose by about 1.9 mln barrels in the week to March 14.
Elsewhere in the report, analysts expect to see a 550,000-barrel drop in gasoline stocks and a 1.7 mln-barrel fall in distillate stocks, which include heating oil, as the colder weather spurs demand. Refinery runs, meanwhile, are predicted to have jumped 0.04 percentage points from the previous week.
Euro is Not Giving Clue of FED Rate Cut
Euro Created Life Time High of 1.59036 & CMP is 1.57725; Technically Its On Overbought Zone & Not Looking 2 Break 1.60000 Benchmark. If Today FED Going 2 Cut The Rate By .75 Basis Points Than It Can Zoom Like Anything. But On The Charts Its Not Looking 2 Kiss/Break 1.60000. In Downside Its Looking 2 Fall Upto 1.53000-1.50000-1.48000 in Coming Days.
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