Bitesize Global Overview… Sept 18th 2012

Equity markets extend gains – Equity markets rose strongly last week, as the Federal Reserve’s decision to launch a third round of quantitative easing to bolster the US economy along with upbeat news out of the eurozone gave fresh impetus to risk assets. Equities extended earlier gains as the week progressed, and commodities including gold made healthy gains.

US Federal Open Market Committee Meeting – In its post-meeting policy statement, the Fed announced its highly-anticipated quantitative easing, purchasing additional agency mortgage backed securities at a pace of $40 billion per month in another effort to stimulate the economy. The Fed also extended its guidance on how long interest rates would stay “exceptionally” low, from late 2014 to mid-2015.

US economic data – The US Federal Reserve has lowered its 2012 growth forecast, expecting it to be no stronger than 2% this year. Elsewhere, the University of Michigan consumer confidence index rose to its highest level since May.

Currencies – On currency markets, the euro currency was boosted by recent positive developments surrounding the eurozone debt crisis and the US Federal Reserve’s decision to launch a fresh round of quantitative easing. Over the course of the week, the euro rose above 1.30 to reach its highest level against the dollar in more than four months. The €/$ rate ended the week at €1.31, a strengthening of 2.6%.

Oil & Commodities – Commodities rallied to multi-month highs last week after receiving a boost from the US Federal Reserve’s decision to launch further stimulus. The West Texas oil price ended the week at $99 a barrel, 2.7% higher. Elsewhere, gold prices jumped to a six-month peak of $1,773 a troy ounce, a gain of over 2%. Elsewhere, silver, platinum and palladium also gained.