ASX to rise on clear outlook from US Fed, iron ore surges

• Australian dollar at 72.39 US cents at 7.32am AEST
• Wall Street S&P 500 +1%, Dow Jones +1%, Nasdaq +1%
• Europe: Stoxx 50 +1.3%, FTSE +1.5%, DAX +1%, CAC +1.3%
• Spot gold unchanged at $US1768.17 per ounce
• Brent crude +2.1% to $US75.94 a barrel
• US oil +2.5% at $US72.23 a barrel
• Iron ore +16.8% to $US108.70 a tonne
• 10-year yield: US 1.30% Australia 1.25% Germany -0.33%

The Australian sharemarket is expected to open higher on Thursday, buoyed by gains on Wall Street after the Federal Reserve signalled it may begin easing its extraordinary support measures for the economy later this year.

In a statement issued early Thursday morning AEST, the Fed said it may start raising its benchmark interest rate sometime next year, earlier than it envisioned three months ago.

Fed chair Jerome Powell also said the US central bank will likely begin slowing the pace of its monthly bond purchases as soon as November if the economy keeps improving. It’s been buying the bonds to help keep long-term interest rates low.

ASX futures were up 17 points, or 0.2 per cent, at 7293 as of 6:15 am AEST, pointing to gains for local stocks when the market opens for trading.

Spot prices for iron ore jumped back above $US100 per tonne, rising 16.8 per cent to $US108.70, which boosted the US-traded shares of mining giants BHP and Rio Tinto.

The benchmark S&P 500 had jumped earlier for the first time in five trading sessions as concerns about China Evergrande Group’s debt woes eased. After the Fed meeting, Mr Powell also downplayed risks of market contagion from the implosion of the Chinese real estate giant, saying there was little direct US exposure to its debt and the situation “seems very particular to China, which has very high debt for an emerging economy”.

The S&P 500 closed 0.95 per cent higher at 4396, and on pace to break a four-day losing streak. It initially climbed to 1.4 per cent after the Fed’s statement. The other major indexes also received a bump, but shed some of their gains by late afternoon. The Dow Jones Industrial Average was up 339 points, or 1 per cent, to 34,259 and the Nasdaq also rose 1 per cent.

“The risk was that the Fed would announce tapering and a timeline today,” said Michael Arone, chief investment strategist at State Street Global Advisors’ US SPDR business. ” I think that would have been an unexpected surprise that would have created some volatility and some negative reaction by investors, and that didn’t happen, and so investors are happy.”

The yield on the 10-year Treasury note wobbled up and down after the Fed’s announcement, but wound up little changed at 1.30%.

“We expect further clarity in the coming months as the Fed divulges the details for tapering the bond purchase program and adjusts the pace of unwinding as they see fit,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.