Australian sharemarket forecast to rise, dollar gains 3pc
Allison Jackson March 19, 2009
Article from: The Australian
THE Australian dollar surged and shares are expected to open higher after the US Federal Reserve's decision to buy government bonds.The Aussie surged 2.8 per cent to US67.98 cents, the highest level in more than five weeks, from yesterday’s close of US66.13c. The June share price index futures contract rose 30 points to 3508, pointing to the possibility of a 0.9 per cent rise in the S&P/ASX 200. Australian three-year government bond futures also soared on the back of the announcement, rising 21 points to 96.99 for an implied yield of 3.01 per cent. The Fed said it would buy up to $US300 billion ($443 billion) in longer-term government bonds as well as spend an additional $US750 billion mopping up mortgage-back securities, in order to reduce rates for business and consumer loans and stimulate spending in the economy. The plan pushed Wall Street higher. The Dow rose 90.88 points (1.23 per cent) to 7486.58, its highest close in a month. The S&P 500 added 16.23 points (2.09 per cent) to 794.35, after ticking above the psychologically significant 800-level during the session for the first time since February 17. The technology-oriented Nasdaq Composite rose 29.11 points (1.99 per cent) to 1491.22, helped by a reported IBM bid to buy Nasdaq component Sun Microsystems.
Practise responding to this article a little like you would a DRQ question:
1.Define the terms Bond, futures, Dow Jones, S&P 500, Nasdaq, index, confidence.
2.Draw an appropriate diagram to help show what is happening to one of these markets and why.
3.Use your knowledge and evidence from the article to explain the effect of news like this on the Australian share market.
Subscribe to:
Post Comments (Atom)
1 comment:
Bond is like a loan. the issuer is the borrower (US Federal Reserves), the bond holder is the lender, and the coupon is the interest. Bonds provide the borrower with external funds to finance in case of long term government bonds. Long term bonds, chronologically, increases its interest rates (like bank loans). Referring to the article, bonds as well as an additional $US750 billion mopping up mortgageback securities, is stimulating the spendings in the economy thus reducing rates for business and consumer loans.
Post a Comment