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Positive Reaction To Fed Statement May Generate Buying Interest

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to add to the modest gains posted in the previous session.

The markets may continue to benefit from a positive reaction to the Federal Reserve's monetary policy announcement on Wednesday.

The Fed left interest rates unchanged as widely expected but signaled that the next change in interest rates is likely to be a rate cut.

While the Fed did not provide a specific time frame for lowering rates, CME Group's FedWatch Tool shows the markets are pricing in a rate cut at the next monetary policy meeting in late July.

The FedWatch Tool currently indicates a 63.6 percent chance for a 25 basis point rate cut and a 36.4 percent chance for a 50 basis point rate cut.

Traders are likely to closely watch incoming economic data in the weeks leading up to the meeting for clues about the potential for lower rates.

Stocks showed typical volatility on the heels of the Federal Reserve's monetary policy announcement but managed to end Wednesday's trading mostly higher amid indications the central bank plans to cut interest rates sometime in the future.

The major averages posted moderate gains, once again reaching their best closing levels in over a month. The Dow edged up 38.46 points or 0.2 percent to 26,504.00, the Nasdaq climbed 33.44 points or 0.4 percent to 7,987.32 and the S&P 500 rose 8.71 points or 0.3 percent to 2,926.46.

The higher close on Wall Street came after the Fed suggested the next move for rates is likely to be lower, although buying interest was somewhat subdued amid signs the rate cut could be delayed until next year.

The Fed announced its widely expected decision to leave interest rates unchanged on Wednesday, with the focus largely on the wording of the accompanying statement.

The statement said the Fed continues to see a sustained economic expansion, a strong labor market, and inflation near its 2 percent target as the most likely outcomes but noted uncertainties about this outlook have increased.

"In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion," the Fed said.

The line in the statement mirrors the pledge Fed Chairman Jerome Powell made in a speech earlier this month, which helped spark expectations of a near-term interest rate cut.

Notably, the Fed also omitted its reference to remaining "patient" when determining future changes to interest rates.

The central bank also revealed that its decision to leave rates unchanged was not unanimous, with St. Louis Fed President James Bullard preferring to lower rates by 25 basis points.

Powell acknowledged in his post-meeting press conference that "Many participants believe that some cut to the fed funds rate would be appropriate in the scenario they see as most likely."

The Fed's dot plot projections show eight members expect rates to be unchanged by the end of the year, although a matching number expect at least one rate cut. One member expects a rate hike.

By the end of 2020, nine members expect a rate cut, five expect rates to remain unchanged and three expect an increase in rates.

Gold stocks showed a significant move to the upside in afternoon trading, driving the NYSE Arca Gold Bugs Index up by 1.5 percent. With the jump, the index ended the session at its best closing level in a year.

The advance by gold stocks came as the price of the precious metal moved notably higher in electronic trading in reaction to the Fed announcement.

Considerable strength also emerged among software stocks, as reflected by the 1.1 percent gain posted by the Dow Jones U.S. Software Index.

Healthcare, pharmaceutical and utilities stocks also saw notable strength, while banking stocks came under pressure as the day progressed.

Commodity, Currency Markets

Crude oil futures are jumping $1.74 to $55.50 a barrel after dipping $0.14 to $53.76 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,383.60, up $34.80 compared to the previous session's close of $1,348.80. On Wednesday, gold slipped $1.90.

On the currency front, the U.S. dollar is trading at 107.72 yen compared to the 108.10 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1296 compared to yesterday's $1.1226.

Asia

Asian stocks moved broadly higher on Thursday as investors cheered a dovish Federal Reserve statement and looked forward to the G20 summit at the end of the month for progress in U.S.-China trade talks.

China's Shanghai Composite Index jumped 69.32 points or 2.4 percent to 2,987.12 amid mounting hopes for the U.S.-China meeting. Hong Kong's Hang Seng Index jumped 348.29 points or 1.2 percent to 28,550.43.

Japanese stocks hit fresh six-week highs despite a stronger yen weighing on exporters. The Nikkei 225 Index closed up 128.99 points or 0.6 percent at 21,462.86 after soaring 1.7 percent the previous day.

The broader Topix closed 0.3 percent higher at 1,559.90 as the Bank of Japan kept its monetary policy steady, as widely expected, but hinted at sustained support for easy monetary policy amid increased global risks.

Realty stocks witnessed buying, with Mitsubishi Estate climbing 1.5 percent and Mitsui Fudosan rising 1 percent. Pharmaceutical company Iwaki & Co. soared 4 percent after raising its net profit forecast.

On the other hand, Honda Motor and Mazda Motor fell around 2 percent as the dollar hit its lowest level against the yen since January 3rd.

Australian markets advanced even as mining stocks fell on concerns about increased iron ore supply. The benchmark S&P/ASX 200 Index rose 39.30 points or 0.6 percent to 6,687.40, while the broader All Ordinaries Index ended up 39.40 points or 0.6 percent at 6,767.90.

The big four banks rose between 0.3 percent and 0.7 percent amid expectations the Fed will cut interest rates next month in the wake of increased external and domestic economic risks.

Meanwhile, mining stocks fell on the day, with Rio Tinto plunging 4 percent after downgrading its iron ore guidance once again.

Fuel retailer Caltex Australia slumped 13.3 percent after a warning that its first-half profit will more than halve from last year. Rival Viva Energy Group plummeted 8 percent.

Seoul stocks ended a tad higher on hopes that U.S. President Donald Trump and Chinese President Xi Jinping can make progress on easing trade tensions at the G20 summit in Japan next week.

The Kospi inched up 6.51 points or 0.3 percent to 2,131.29. LG Display shares jumped 7 percent on reports the company shipped the most automotive displays in the first quarter.

Europe

European stocks have risen on Thursday after the Federal Reserve shifted towards a more dovish stance and media reports quoted EU officials as saying that the European Commission was unlikely to recommend further steps next week in disciplinary procedures over Italy's rising debt.

Meanwhile, investors have largely shrugged off a government report showing that U.K. retail sales declined for the second straight month in May.

While the German DAX Index has advanced by 0.9 percent, the U.K.'s FTSE 100 Index is up by 0.8 percent and the French CAC 40 Index is up by 0.7 percent.

Miners Anglo American, BHP and Glencore have risen after London copper prices climbed to a more than three-week high.

German business software firm SAP has also moved sharply higher after archrival Oracle returned to sales growth.

Delivery Hero shares have soared after the online food delivery group raised its annual guidance for a second time in two months.

N Brown Group has also jumped in London. After delivering a solid trading performance in the first quarter, the online retailer affirmed its fiscal 2020 expectations.

On the other hand, shares of Dixons Carphone have slumped after the consumer electrical and mobile retailer warned on fiscal 2020 headline profit after reporting a loss in fiscal 2019.

U.S. Economic Reports

A report released by the Labor Department showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended June 15th.

The report said initial jobless claims dipped to 216,000, a decrease of 6,000 from the previous week's unrevised level of 222,000. Economists had expected jobless claims to edge down to 220,000.

Meanwhile, the Labor Department said the less volatile four-week moving average inched up to 218,750, an increase of 1,000 from the previous week's unrevised average of 217,750.

A separate report from the Philadelphia Federal Reserve showed regional manufacturing activity was nearly stagnant in the month of June.

The Philly Fed said its index for current general activity tumbled to 0.3 in June from 16.6 in May. While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to slip to 11.0.

With the much bigger than expected decrease, the Philly Fed Index fell to its lowest level since turning negative in February.

At 10 am ET, the Conference Board is scheduled to release its report on leading economic indicators in the month of May. The leading economic index is expected to inch up by 0.1 percent in May after rising by 0.2 percent in April.

The Treasury Department is due to announce the details of this month's auctions of two-year, five-year and seven-year notes at 11 am ET.

Stocks In Focus

Shares of Oracle (ORCL) are moving significantly higher in pre-market trading after the business software giant reported fiscal fourth quarter results that beat analyst estimates on both the top and bottom lines.

Tech conglomerate Dell Technologies (DELL) may also see initial strength after Deutsche Bank initiated coverage of the company's stock with a Buy rating.

On the other hand, shares of Carnival (CCL) are seeing significant pre-market weakness after the cruise line operator reported better than expected fiscal second quarter results but lowered its full-year guidance.

Olive Garden parent Darden Restaurants (DRI) may also come under pressure after reporting fiscal fourth quarter earnings that beat estimates but weaker than expected sales.

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