Exchange traded funds (ETFs) closed not far from where they opened after the Federal Reserve released minutes from its most recent meeting that showed members of the central bank are split about inflation.
- The Federal Reserve is planning how to end years of ultra-loose monetary policy in the face of the US recovery and looming inflation fears, minutes from the latest policy meeting show. Amid concern that sustained unrest in oil producing nations might spark entrenched inflation, minutes from the Fed’s March meeting show members discussed ending long-standing policies, including ultra-low interest rates. The Fed has kept interest rates near zero since December 2008 and bought up more than a trillion dollars in assets to help stimulate the economy. While some members “indicated that economic conditions might warrant a move toward less-accommodating monetary policy this year,” a few others “noted that exceptional policy accommodation could be appropriate beyond 2011,” the minutes showed. The iShares Barclays Short Term Treasury Bond ETF (NYSEArca: SHV) closed flat today.
- Brent crude jumped to a 2-1/2 year peak above $122 a barrel on Tuesday, gaining for a fourth straight day as conflict and unrest in Africa and the Middle East more than offset China’s latest interest rate hike. U.S. crude futures slipped in choppy trading ahead of weekly inventory reports, hemmed in by the prospect that the reports, starting with industry data due late in the day, will show crude stocks rose again last week and more supply arrived at the Cushing, Oklahoma, delivery hub. Brent prices were lifted on Monday by news of delays for several April cargoes of Forties crude — which typically sets the level of dated Brent benchmark — due to a brief drop in North Sea Buzzard oilfield production last week. The PowerShares DB Oil ETF (NYSEArca: DBO) ended flat at days end.
- Gold jumped to an all-time high above $1,450 an ounce on Tuesday, as peak crude and corn prices fanned inflation fears and a downgrade of Portugal’s credit rating drew attention to Euro zone problems. On technical charts, gold broke above a recent double-top technical formation around $1,440 an ounce. This added to a rush of buying triggered by news that Portugal’s leading banks threatened to stop buying government debt hours after a Moody’s downgrade. “It appears that gold is beginning a new up-trend after its recent consolidation,” said Adam Sarhan of Sarhan Capital. “If gold negates this breakout and falls back below $1,440 to $1,430, one would expect sideways action to continue.” The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) gained 5.74% on Tuesday.
- European shares edged up to their highest close in nearly four weeks on Tuesday, with energy firms gaining after further unrest in the Middle East pushed crude prices to a two-and-a-half year high. The pan-European index is up 7.2% from a mid-March low, as investors focus more on the strength of the economic recovery, confident it will not be significantly affected by unrest in the Middle East and North Africa, or Japan’s nuclear crisis. Analysts said shares could gain further; even as monetary policy tightens, including an expected rise in European Central Bank interest rates this week. China’s central bank raised interest rates for the second time this year on Tuesday, redoubling efforts to cool stubborn price pressures. The iShares MSCI United Kingdom Index ETF (NYSEArca: EWU) ended slightly higher today
For disclosure, Tom Lydon’s clients own GDXJ.
Gregory A. Clay contributed to this article
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