ASX set to jump as Wall Street rallies after Fed says rate hikes are unlikely

The S&P 500 was up 1 per cent in afternoon trading after the Fed held its main interest rate at its highest level since 2001, just as markets expected. The Dow Jones was up 1.2 per cent and the Nasdaq composite was 1.6 per cent higher. The Australian sharemarket is set to rise, with futures pointing to a gain of 37 points, or 0.5 per cent, at the open.

Such a move could help grease the trading wheels in the financial system, offering stability in the bond market. Powell said the Fed did it to reduce “risk of money markets showing stress,” while saying its benchmark interest rate is the main tool for guiding inflation and the overall economy.The yield on the 10-year Treasury fell to 4.58 per cent from 4.65 per cent just before the announcement.

Without the benefit of easing rates, which can goose the economy and investment prices, companies will need to deliver better profits. Starbucks dropped 17.3 per cent after falling short of expectations for both profit and revenue in the latest quarter. Sales trends weakened at its stores outside the United States in particular, and it cut its full-year forecasts for profit and revenue.

Before the Fed’s announcement, stocks and Treasury yields had been moving relatively little following some weaker-than-expected reports on the economy.

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