Global markets rally on Fed stimulus hope, European cues

**All eyes are on the Federal Reserve's statement; street has been pricing in some form of easing today.

Base case scenario appears to be an extension of operation Twist; Policy decision will be out at 12:30 pm EST (23 hours IST)

US markets ended higher on Fed Stimulus hopes on Tuesday; five shares advanced for every share declining, but volumes were light

US economic data was mixed while European data was weak particularly Germany. 

US Housing starts came in weaker than expected at 7,08,000 as against consensus estimate of 7,22,000 that fell 4.8% month-on-month

However, building permits were better than expected at 7,80,000 versus consensus estimate of 7,30,000

German ZEW confidence index was down to -16.9 from 10.8 in May; current conditions declined at 33.2 versus 44.1

Spain pays a record 5.07% in the treasury bills auction that was higher by 200 basis points from last month

Also rumors that Germany is agreeing to use ESM, EFSF to buy Italian and Spanish bonds aid, but denied the same by Germany 

Spain's 10-year bond yields fell below 7% now at 6.94%; Italy was below 6% at 5.88%.

US markets at close: Dow Jones rose 0.8% to 12,837.3. S&P 500 Index went up 1% to 1,358 and Nasdaq Composite was up 1.2%

European markets at close: DAX, FTSE and CAC were up 1.7%. Italy surged 3.4% and Spain gained 2.7%

Asia Today

Nikkei gained 0.8% and Straits Times was up 0.5%

Hang Seng moved up 0.4% and Kospi rose 0.3%

Taiwan Weighted was 0.2%.

SGX Nifty went up 0.3% to 5,135

Currencies

Dollar was on the back foot on Fed stimulus hope

Euro gained 1% yesterday that hit a session high of 1.273 as against the US dollar

Dollar index was at 81.4 today as against around 82 yesterday

Australian dollar hit 1.5 months high at 1.02 to the US dollar

Commodities

CRB Index rallied 1.3%, seeing best rise in 4 months on stimulus hope

Move was led by agriculture commodities

WTI crude ended up 1% above USD 84 a barrel

LME Copper was up 1% above USD 7600 per tonne

Brent crude settled down 0.2% to below USD 96 a barrel

Gold was hovering around USD 1620 an ounce

What to watch out for

German PPI

UK Jobless Claims, Minutes of BoE Meet 

EIA Inventory report