Here’s your morning update, and how the Fed’s decision not to taper was taken.
– In a broad statement from the FOMC, it was just 19 words that ignited a massive market move with US stocks hitting all time highs, the US dollar and bond yields on Treasuries collapsing and Gold surging higher. Those words: “The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
– As Joe Weisenthal from the BI mothership in the US tweeted about half an hour after the Fed Statement: “Gee, it’s almost as if the Fed weren’t joking when it said the decision would be data-dependent.” Which is important in the context of the Fed’s downgraded expectations for growth for 2013 and 2014 that accompanied the FOMC Statement this morning.
– At the close, the Dow has hit an all-time high of 15710 and closed at 15677 up 0.95%, the Nasdaq is up 1.02%, and the S&P 500 is now well through the 1700 level, reaching a high of 1729 before closing up 21 points for a gain of 1.25%. Europe closed stronger but missed this rally and will open with gusto this afternoon.
– Closer to home, the ASX will be very strong particularly, because the decision not to taper will help notions of global growth and thus the miners. SPI200 trading on the Sydney Futures Exchange overnight saw a rise of 59 points in the September contract with heavy turnover of almost 12,000 lots overnight.
– Rates have rallied as well, with Australian 10-year bond futures showing a fall in yield of 12 basis points, which is a little less than the 15 points in the US. That took Treasuries down to 2.70%. UK and German rates will reverse last night’s losses and follow suit tonight.
– On FX markets, the decision not to taper saw the US dollar collapse from a dollar index value of 81.22 to 80.29. The Euro (1.3491) soared from the day’s low at 1.3337, with the Pound (1.6100) rallying more than 1.25%. USDJPY collapsed from 100 points from 99.33 to sit at 98.13 but it was the Aussie dollar with the turbochargers burning, rising 1.35% to 0.9479 its highest level in exactly three months. Positioning is likely to drive it higher still.
– On Commodity markets, Gold had a very big night, trading down to a low of $1290 oz. but it has rallied more than $70 off that low to $1360 this morning. Nymex crude bounced with the US dollar weakness, up 2.52% to $108.08 Bbl with Copper up a similar amount to $3.31 lb. The Ags were quite up, around half a per cent each.
– On the data front, jobless claims tonight will be big as always but before that we get New Zealand GDP for Q2, Japanese Trade data and a speech from BoJ Governor Kuroda, The RBA Bulletin and FX transactions and then UK retail sales. In the US, as well as jobless claims, there will be data on existing home sales and the Philly Fed manufacturing survey.
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