What happened? On Friday night Australian time the US Federal Reserve, led by Janet Yellen as chairperson, decided to leave the official US interest rate steady at 0%-0.25% sending the US sharemarket 2% lower as investors fretted over the state of the economy.
So What? The decision to leave interest rates near-zero should have little real impact on the Australian economy, however investors should expect the local sharemarket to open sharply lower as Yellen cited recent volatility triggered by the slowing Chinese economy as a reason for holding fire. This is bad news for Australia as we're so reliant on China, so if the head of the US Fed is worried, we should be too right?
Now What? I expect that we'll see companies heavily linked to either US interest rates or China hit hardest on Monday morning. Consider these companies as potential buying opportunities if you believe that Ms Yellen might have this one wrong:
QBE Insurance Group Ltd (ASX: QBE) is set to be a big beneficiary of higher US interest rates owing to its huge investible cash hoard in US dollars- largely invested in defensive assets linked to US rates.
Computershare Limited (ASX: CPU); see above for QBE, Computershare has lots of money invested in low-yielding investments.
While many investors would have already been concerned over the China iron ore situation, it could be exacerbated by Yellen's comments- expect Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) to feel some pain.
The oil price fell 5% after the Fed announcement so expect further falls from Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH).
Longshot: Westfield Corp Ltd (ASX: WFD) shares could fall as the outlook for the US economy could impact its pipeline of shopping centre and property developments in the US.
