Bonds/Interest Rates

Wall Street began to feel more edgy last night as the US dollar accelerated its slide against major currencies. Mixed earnings reports included a shock result from Goldman Sachs.

Positive momentum carried through on Wall Street last night. Base metals in London posted the gains they would have made yesterday had the exchange not closed before the Fed announcement.

July TIC data showed that the flow of foreign funds into the US was already starting to dry up even before the proverbial hit the fan in August.

Just as important as the rate cut itself is the accompanying Fed rhetoric.

The Fed cut the target rate and the discount rate by 50 basis points last night. The Dow rallied 336 points. The US dollar fell to a record low. Gold surged to a 27-year high. Oil surged to a record high. The Aussie jumped US2c.

Increasingly bellicose rhetoric from Dick Cheney with respect to Iran helped to push oil and gold higher last night as Wall Street awaited the Fed.

Volatility is set to return to the markets this week as the Fed makes its rate decision and US brokerages report third quarter earnings.

The Reserve Bank of New Zealand left official interest rates unchanged yesterday and economists suggest early next year is the soonest the market can expect a rate cut.

Good news from McDonald’s and GM pushed the Dow higher in light trade while the financial sector also benefited from some positive developments.

Wall Street range traded last night as oil and wheat posted record highs and the dollar fell to an all time low against the euro. The I-word is back.