U.S. stocks extend gains on Fed language; Dow rises 0.64%

U.S. stocks carried Wednesday's gains into Thursday as investors applauded a Federal Reserve decision to keep benchmark interest rates low for some time to ensure the economy continues to strengthen.

At the close of U.S. trading, the Dow 30 rose 0.64%, the S&P 500index rose 0.49%, while the NASDAQ Composite index rose 0.68%.

The Volatility S&P 500 index, which measures the outlook for market volatility, was down 4.82% at 12.04.

The Federal Reserve on Wednesday said that it will likely close its monthly bond-buying program in October and suggested it will raise interest rates in 2015.

The Fed added interest rates will hover just above zero for a "considerable time" after it closes its easing program, but the U.S. central bank also suggested it could begin hiking benchmark borrowing costs faster than anticipated once it decides to start tightening policy.

Still, stocks rose on anticipation for interest to remain low for a while as the economy gains steam, with financials posting solid gains in the rally.

A mixed bag of data failed to seriously dampen Thursday's gains, as investors shrugged off soft housing data and focused on upbeat numbers out of the labor market.

In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending Sept. 13 fell by 36,000 to 280,000, the lowest level since mid-July, from the previous week’s revised total of 316,000.

Analysts had expected jobless claims to fall by 11,000 to 305,000 last week.

Separately, the U.S. Commerce Department said that the number of building permits issued last month dropped by 5.6% to 998,000 units from July’s total of 1.057 million.

Analysts expected building permits to fall by 0.4% to 1.045 million units in August.

In company news, Oracle Corporation (NYSE:ORCL) CEO Larry Ellison stepped down as CEO though he will become executive chairman and chief technology officer, while Sears Holdings Corporation (NASDAQ:SHLD) shares took a hit earlier after Credit Suisse analyst Gary Balter said the department store should liquidate.

Leading Dow Jones Industrial Average performers included Dupont Fabros Technology Inc (NYSE:DFT), up 2.84%, Goldman Sachs Group Inc (NYSE:GS), up 1.68%, and J P Morgan Chase & Co (NYSE:JPM), up 1.67%.

The Dow Jones Industrial Average's worst performers included Exxon Mobil Corporation (NYSE:XOM), down 0.47%, Chevron Corporation (NYSE:CVX), down 0.46%, and General Electric Company (NYSE:GE), down 0.21%.

European indices, meanwhile, ended the day higher.

After the close of European trade, the DJ Euro Stoxx 50 rose 0.89%, France's CAC 40 rose 0.75%, while Germany's DAX rose 1.41%. Meanwhile, in the U.K. the FTSE 100 rose 0.57%.

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U.S. initial jobless claims fall by 36,000 to 280,000 last week

The number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level in seven years, fuelling optimism over the strength of the labor market, official data showed on Thursday.

Analysts had expected jobless claims to fall by 11,000 to 305,000 last week.In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending September 13 decreased by 36,000 to a seasonally adjusted 280,000 from the previous week’s revised total of 316,000.

Continuing jobless claims in the week ended September 6 fell to 2.429 million from 2.492 million in the preceding week. Analysts had expected continuing claims to increase to 2.470 million.

The four-week moving average was 299,500, a decline of 4,750 from the previous week’s total of 299,500. The monthly average is seen as a more accurate gauge of labor trends because it reduces volatility in the week-to-week data.

EUR/USD was trading at 1.2859 from around 1.2870 ahead of the release of the data, while GBP/USD was at 1.6362 from 1.6365 earlier.

Meanwhile, U.S. stock index futures remained higher. The Dow 30indicated a gain of 0.2% at the open, the S&P 500 pointed to a rise of 0.3%, while the NASDAQ 100 indicated an increase of 0.25%.

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Rite Aid, Pier 1 slide; futures rise on Fed support

NEW YORK (Reuters) - Shares of Rite Aid Corp (N:RAD) were falling early Thursday, in the highest volume so far on the New York Stock Exchange, after it cut its full-year profit forecast for a second time this year and lowered the top end of its sales forecast.

Shares of the third-largest U.S. drugstore chain were last down 6.2 percent at $6.23 after advancing 31.2 percent so far this year to Wednesday's close.

Another large mover in premarket trading was Pier 1 Imports (N:PIR), down 11.8 percent to $13.70 a day after it slashed its full-year earnings forecast to $0.95-$1.05 per share from $1.14-$1.22 and reported a weaker-than-expected profit for the second quarter.

U.S. stock index futures were rising in light volume on Thursday, setting up the S&P 500 to test resistance at its record high, a day after the Federal Reserve renewed its commitment to keeping rates low.

The Fed said Wednesday it will keep interest rates near zero for a "considerable time," a language supportive of equities and other risky assets. It also indicated it could raise borrowing costs faster than previously forecast when it starts moving, boosting the U.S. dollar.

Data on monthly housing starts and building permits, as well as weekly applications for unemployment insurance, is due at 8:30 a.m. EDT. The Philly Fed business index is due at 10:00 a.m.

Futures snapshot at 7:53 a.m. EDT:

* S&P 500 e-minis were up 7.5 points, or 0.37 percent, with 46,858 contracts changing hands. At their session high, S&P futures came within 0.25 point of a record peak.

* Nasdaq 100 e-minis were gaining 15.5 points, or 0.38 percent, in volume of 2,616 contracts.

© Reuters. Traders work on the floor of the New York Stock Exchange

* Dow e-minis <1YMc1> were up 52 points, or 0.3 percent, with 5,057 contracts changing hands.

(Editing by Bernadette Baum)

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European stocks push higher, Fed statement supports; Dax up 0.96%

European stocks pushed broadly higher on Thursday, as the Federal Reserve's latest policy statement continued to support equity markets.

The Fed reiterated on Wednesday that it expects rates to remain on hold for a "considerable time", after its bond purchasing program ends, but it also outlined in more detail how it will start to raise short term interest rates when the time comes.During European afternoon trade, the DJ Euro Stoxx 50 advanced 0.75%, France’s CAC 40 climbed 0.64%, while Germany’s DAXjumped 0.96%.

The Fed cut its monthly asset purchase program by another $10 billion, keeping the program on track to finish next month.

Also Thursday, the European Central Bank said it allotted €82.6 billion to 255 bidders in its new Targeted Long Term Refinancing Operation, or TLTRO, well below the €100 to €150 billion predicted by analysts.

The low loan uptake indicated that the operation will have only a limited impact on boosting liquidity in the euro area. A second operation will be held in December.

The ECB is offering up to €400 billion of cheap liquidity under eight TLTRO operations in order to encourage lenders to offer credit to small businesses and boost inflation in the region.

Separately, investors remained cautious following reports ratings agency Moody’s could downgrade France by one notch from Aa1 to Aa2. Moody’s was to issue a new rating decision on Friday.

Financial stocks were broadly higher, as French lenders BNP Paribas (PARIS:BNPP) and Societe Generale (PARIS:SOGN) jumped 1.08% and 1.95%, while Germany's Deutsche Bank (XETRA:DBKGn) rallied 1.73%.

Among peripheral lenders, Italy's Intesa Sanpaolo (MILAN:ISP) and Unicredit (MILAN:CRDI) gained 0.65% and 1.34% respectively, while Spanish banks BBVA (MADRID:BBVA) and Banco Santander (MADRID:SAN) advanced 1.02% and 1.17%.

Elsewhere, Bayer AG (XETRA:BAYGN) surged 4.99% amid reports the German chemical and pharmaceutical company plans to spin off its plastics unit.

In London, FTSE 100 gained 0.45%, still led by TUI Travel (LONDON:TT), up 3.95%, after it announced last week the decision to unite with German parent company Tui AG (XETRA:TUIGn) in a €6.5 billion merger that will create the world’s largest tourism business.

Financial stocks were also broadly higher, as HSBC Holdings (LONDON:HSBA) and Lloyds Banking (LONDON:LLOY) climbed 0.64% and 0.85%, while Barclays (LONDON:BARC) and the Royal Bank of Scotland (LONDON:RBS) rallied 1.18% and 1.28% respectively.

In the mining sector, stocks remained on the downside. Shares in Bhp Billiton (LONDON:BLT) slid 0.36% and Rio Tinto (LONDON:RIO) retreated 0.65%, while rivals Fresnillo (LONDON:FRES) and Randgold Resources (LONDON:RRS) plummeted 1.94% and 2.09%.

In the U.S., equity markets pointed to a higher open. The Dow 30 futurespointed to an 0.30% rise, S&P 500 futures signaled a 0.40% gain, while the NASDAQ 100 futures indicated a 0.44% increase.

Later in the day, the U.S. was to produce reports on initial jobless claims, building permits, housing starts and manufacturing activity in the Philadelphia region.

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European stocks mostly higher after Fed statement; Dax up 0.32%

European stocks were mostly higher on Thursday, after the Federal Reserve's latest policy statement lent support, while markets awaited the outcome of an upcoming vote on Scottish independence.

In its monthly policy statement, the Fed reiterated that it expects rates to remain on hold for a "considerable time", after its bond purchasing program ends, but it also outlined in more detail how it will start to raise short term interest rates when the time comes.During European morning trade, the DJ Euro Stoxx 50 added 0.16%, France’s CAC 40 edged 0.10% higher, while Germany’s DAX rose 0.32%.

The Fed cut its monthly asset purchase program by another $10 billion, keeping the program on track to finish next month.

Speaking at the bank’s post-policy meeting press conference Chair Janet Yellen stressed that the timing of any change in interest rates is dependent on the strength of the economic recovery.

Investors were also eyeing the European Central Bank, which was set to announce the result of its first targeted-lending program later Thursday.

Financial stocks were broadly higher, as French lenders BNP Paribas (PARIS:BNPP) and Societe Generale (PARIS:SOGN) climbed 0.52% and 0.57%, while Germany's Deutsche Bank (XETRA:DBKGn) rose 0.35%.

Among peripheral lenders, Italy's Unicredit (MILAN:CRDI) and Intesa Sanpaolo (MILAN:ISP) added 0.16% and 0.45% respectively, while Spanish banks BBVA (MADRID:BBVA) and Banco Santander (MADRID:SAN) edged up 0.04% and 0.21%.

Elsewhere, Bayer (XETRA:BAYGN) surged 4.01% amid reports the German chemical and pharmaceutical company plans to spin off its plastics unit.

In London, FTSE 100 edged down 0.10%, weighed by losses in the mining sector.

Bhp Billiton (LONDON:BLT) slipped 0.25% and Rio Tinto (LONDON:RIO) declined 0.48%, while Randgold Resources (LONDON:RRS) and Fresnillo (LONDON:FRES) tumbled 1.48% and 1.54%.

Meanwhile, TUI Travel (LONDON:TT), up 3.86%, led gains on the index after it announced last week the decision to unite with German parent company Tui AG (XETRA:TUIGn) in a €6.5 billion merger that will create the world’s largest tourism business.

Financial stocks added to gains, as HSBC Holdings (LONDON:HSBA) edged up 0.12% and Barclays (LONDON:BARC) gained 0.50%, while Lloyds Banking (LONDON:LLOY) and the Royal Bank of Scotland (LONDON:RBS) advanced 0.75% and 1.06% respectively.

In the U.S., equity markets pointed to a steady open. The Dow 30 futurespointed to an 0.03% uptick, S&P 500 futures signaled a 0.04% gain, while the NASDAQ 100 futures indicated a 0.06% loss.

Later in the day, the U.S. was to produce reports on initial jobless claims, building permits, housing starts and manufacturing activity in the Philadelphia region.

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SNB leaves interest rate unchanged, maintains EUR/CHF floor at 1.20

The Swiss National Bank kept its benchmark interest rate unchanged and reaffirmed its commitment to the minimum exchange rate of CHF1.20 per euro, it announced on Thursday.

In a statement, the SNB said it was keeping its benchmark interest rate unchanged at 0.0%, in line with expectations.

The accompanying rate statement released after the announcement said that the economic outlook has deteriorated considerably and the Swiss franc is “still high.”

The SNB “will continue to enforce the minimum exchange rate with the utmost determination. For this purpose, it is prepared to purchase foreign currency in unlimited quantities. If necessary, it will take further measures immediately."

SNB Chairman Thomas Jordan was to comment on the decision at a press conference later in the day.

EUR/CHF was trading at 1.2082 from around 1.2110 ahead of the decision, while USD/CHF was at 0.9378 from 0.9406 earlier.

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Subdued Price Action as Fed Week Kicks Off

After a quiet week where market participants digested the previous weeks’ employment data in the US, along with fresh accommodating monetary policy measures from the ECB, economic and political event risks pushes its way to the forefront of investors’ minds as the calendar heats up again. The conclusion of the FOMC’s two day monetary policy meeting on Wednesday is of significant importance for the investment community and the direction of the big dollar, with expectations the hawkish camp of the FOMC will get to spread its wings a tad more than has been illustrated in the past.  

While the continuing trimming of the Fed’s asset purchases is very much assured, the more important areas of focus will be the FOMC’s updated economic projections, along with Yellen’s subsequent press conference.  There is upside risk for the USD should the Fed’s dot charts becomes more optimistic in terms of the economic recovery and thus brings interest rate expectations forward, along with potentially seeing a change in forward guidance with the hawks hoping to drop the reference to rates remaining low for a “considerable time” after QE ends.  

Though the economic indicators have showed continued improvement of late, acceleration of the labour market has yet to take off, and thus adds some threat Yellen may try to temper any hawkishness in the rate statement during the press conference afterwards.  While we expect continued upward momentum for the USD into the release, we are cautious a good amount of USD strength has been priced into the market leading up to Wednesday’s decision, with the big dollar susceptible to disappointment if dovish troika of Yellen, Dudley, and Fischer dominate communication.

As we get set to kick off the new trading week, S&P futures have managed to make a modest recovery from the overnight lows that transpired in the wake of disappointing August numbers coming out of the Chinese economy.  Industrial output, fixed asset investment, and retail sales all missed expectations and decelerated when compared to the previous month, suggesting a loss in momentum for the Chinese economy after seeing a rebound in Q2.  That challenging part for the investment community is that rhetoric from policy makers has been focused on structural reform as opposed to stimulus to support economic growth, which leaves investors worrisome about global growth should the struggles seen in August be representative of the months to come. 

 That being said, the Chinese government has been engaging in targeted easing throughout the majority of this year when a priority has been deleveraging, so it’s not clear whether this is another diversion tactic from policy makers and further steps will be taken if growth forecasts appear to be in danger.

With the economic docket fairly light this Monday morning, currency markets are seeing continuation from last week’s price action, with the USD the best performing of the majors ahead of the opening bell, putting pressure on both the Pound and Euro.  Despite the pessimistic Chinese numbers, the Loonie has managed to cauterize its bleeding for the time being, with USDCAD taking a reprieve from last week’s rally to grind away in the high-1.10s.  The Loonie’s relative outperformance is also in contrast to the slide in commodities, both WTI and Brent off almost 1% from Friday’s close.  

While it is likely that broader financial markets take their cues for today’s session from the capacity utilization numbers out of the USD due to be released shortly, they will play second fiddle to the central bank announcements and Scottish referendum ballot that are due to come later in the week.

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Dollar soars to six-year peak on yen after Fed, Tokyo stocks cheer

SYDNEY/TOKYO (Reuters) - Japanese shares jumped on Thursday after the dollar vaulted to a six-year peak on the yen as the Federal Reserve's outlook for rising rates underlined the diverging path between the United states and the rest of the rich world.

In other regional share markets, the reception was mixed, with MSCI's index of ex-Japan Asian shares falling to 12-week lows, on the spectre of rising U.S. rates and slower economic growth in China.

Still, with the Fed renewing its pledge to keep interest rates near zero for a considerable time, European shares are expected to open firmer. Spreadbetters see both Britain's FTSE (FTSE) and France's CAC40 (FCHI) rising 0.2 percent.

While the Fed maintained language suggesting that rate hikes would not happen for a "considerable time," it also indicated Fed policymakers think it could raise borrowing costs faster than expected when it starts moving. [TOP/CEN]

The upshot was that the euro skidded to a 14-month trough while gold hit an eight-month low as the dollar swept higher across the board, a move that many investors have been itching to wager on all year.

The market reaction also overshadowed a surprisingly soft reading on U.S. inflation, even as Fed Chair Janet Yellen emphasised that policy would be highly dependent on how the economy actually performed in coming months.

"Overall, we feel that the forward guidance from the Fed is consistent with policy normalisation in 2015," said Dylan Eades, an economist at ANZ.

"Whilst the timing of the first rate rise is data dependent, we continue to expect that the FOMC will begin the normalisation process in March next year."

Futures markets <0#FF:> still lean more towards a move in June. But whatever the timing, U.S. rates do seem certain to be heading higher while central banks in the euro zone and Japan remain committed to super-easy monetary policy.

That stark contrast sent the euro sinking as far as $1.2834 , depths last visited in July 2013. Measured against a basket of currencies, the dollar climbed to 84.753, the highest in 14 months.

The dollar also flew to 108.87 yen , its highest since September 2008 and up from around 107.00 before the Fed statement.

A weaker yen is generally viewed as positive for Japanese exports and company earnings, helping lift the Nikkei (N225) 1.1 percent to its best since January.

The broad Topix index (TOPX) climbed 1 percent to tread ground not visited since July, 2008.

SCOTTISH VOTE STILL TO COME

Elsewhere in Asia, the reaction in equities was more guarded as the prospect of rising U.S. yields could attract funds away from emerging markets.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 0.7 percent, having fallen nine sessions in the past 10 days.

Many emerging shares were bruised earlier this year by speculation of a sooner start to U.S. rate hikes but analysts say their correction may soon come to an end.

"Even though the Fed will finish its bond buying, it is not going to raise rates any time soon. I doubt that emerging markets will enter a bear market," said Yukino Yamada, senior strategist at Daiwa Securities.

Indeed, Wall Street seemed to find some relief in the very fact that the Fed would not be hiking for a few months at least.

After whipsawing in a wide range, the Dow (DJI) settled 0.15 percent higher, while the S&P 500 (SPX) gained 0.13 percent and the Nasdaq (IXIC) 0.21 percent.

Bond investors reacted with more calm than those in currency markets, and nudged yields on the benchmark 10-year note (US10YT=RR) up a modest 2 basis points to 2.62 percent.

Still, a rise in two-year yields (US2YT=RR) to 0.57 percent widened their premium over German debt to 63 basis points, the fattest margin since early 2007.

With the Fed out of the way, the next big test for markets will be the referendum on Scotland's independence later on Thursday.

The latest opinion poll by Survation showed support for staying in the United Kingdom is at 53 percent, giving sterling a mild lift. The pound was at $1.6310 , having been as low as $1.6052 earlier in the month.

In commodities, the rise of the dollar was a dead weight on prices. Gold steadied for now at $1,223.21 an ounce after having touched an eight-month trough of $1,216.01.

Oil prices were further pressured by a government report showing crude stocks rose sharply in the United States last week.

© Reuters. A pedestrian looks at an electronic board showing stock market indices outside a brokerage in Tokyo

Brent crude and U.S. crude were both down 0.5 percent on Thursday at $98.47 a barrel and $93.94, respectively.

(Editing by Eric Meijer and Jacqueline Wong)

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