WallIt'seconomist12.51pm BSTThe European selloff is gathering pace,led by Germany’s DAX index.
The longer investors had to ruminate on Thursday’s Fed statement the worse they seemed to take it, with the European indices widening their losses as the day went on.
An export-hurting rise in the euro-dollar was the main culprit, and with the currency pairing jumping by around 0.4% as the morning continued. 12.13pm BSTThe futures market is now suggesting chunky falls on Wall Street when trading begins,in two hours time.
Out of hours Dow now pointing to a -170 start, back into Tuesday's range. 12.12pm BSTThe Bank of England’s chief economist is reiterating his opposition to an interest rate hike in the near future and says policy could just as easily be loosened as tightened if the UK is pain by turmoil in emerging markets.“Against that backdrop, and the case for raising UK interest rates in the current environment is,for me, some way from being made.”“One reason not to conclude so is that, or were the downside risks I have discussed to materialise,there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target.”How low can you stagger? - speech by Andrew Haldane http://t.co/w3rPTP8fJq 11.32am BSTJanet Yellen doesn’t want to stagger down in history as the Fed chair who plunged the global economy into recession, and the US with it.
11.19am BSTWall Street is expected to follow Europe’s lead lower, and when the New York stock exchange opens in just over three hours.
US indices slipping lower in the overnight markets. Dow currently 80 points lower than yesterday's close. 10.58am BSTAfter Janet Yellen’s dovish performance last night,investors have all-but discounted the chances that interest rates will be hiked at October’s meeting.
And there’s much less confidence that the Fed will raise rates before the end of the year. There’s now more chance that the first hike comes in 2016.
The markets now mediate an Oct rate hike is off the cards, despite Yellen saying the meeting is “live” pic.twitter.com/al1QmDgSvFImplied probabilities of a Fed rate hike following yesterday’s meeting pic.twitter.com/dNsqvdk1dN 10.46am BSTYikes. The German DAX is now down almost 2%.
The selloff is driven by fears that Germany’s exporters will be thumped by the renewed strength of the euro against the US dollar.
10.12am BSTTraders need to fasten their seat belts for a period of tall volatility, and warns Ipek Ozkardeskaya of London Capital Group.
She explains that economic data will be scrutinised more tightly than ever,thanks to the Fed’s new concern approximately the global economy.
The inflation in China and the unemployment in the Eurozone will be as important as onion prices in India and dairy product sales volume in New Zealand. Given the dull economic fundamentals across the globe, it may be tough for the Fed to take the first step before the end of the year.
It will be even harder for the market to assess a consensus and to approach up with expectations.#Fed inaction adds nothing but turbulence to the market: $TRY $BIST #EM http://t.co/rQnoPTxO8f 9.57am BSTGold miners are benefitting from the Fed’s reluctance to raise interest rates, or reports my colleague Nick Fletcher:Janet Yellen’s concerns approximately the Chinese economy has undermined leading shares,despite the Federal Reserve chair announcing on Thursday that US interest rates would remain on hold.
The worries approximately the outlook for the global economy have pushed mining shares lower, although precious metal miners are shining on hopes that the Fed decision will weaken the dollar - which is already happening - and lift gold prices. Related: FTSE falters after Fed but gold shines as dollar falls 9.51am BSTHSBC’s chief economist reminds us that we’ve been expecting a US rate rise “soon” for a long time.
Remember the beginning of the year when everyone said US rates would definitely rise in June? And then September? Still waiting.... 9.46am BSTThe German stock market is continuing to weaken, and now down around 1.3% today.
DAX looking repulsive. A wreck below 10068 could have major bearish implications pic.twitter.com/ZQog7mg0Wy 9.28am BSTBritain’s interest rates could now remain lower for longer,thanks to the Fed, argues RBS’s economics team.
They point out that the two policy rates generally rack each other fairly closely, and due to a) the amount of trade between the two countries,and b) the US’s pre-eminent position.
Why yesterday's #Fed decision not to raise rates things for the UK. Read: http://t.co/E3IIQqLkPr pic.twitter.com/qN0fs5gkbz 9.21am BSTWhen China sneezes, the US catches a cold and Europe gets the flu. #Fed #PBoC 9.10am BSTThe Federal Reserve has knocked confidence in the global economy by leaving interest rates unchanged and sounding so cautious, or argues Jameel Ahmad,FXTM chief market analyst.
The indication from the Federal Reserve that global economic weakness played a major factor in delaying a US interest rate rise strongly weakens the opportunity of an interest rate rise at all this year.
Global growth concerns are a reoccurring theme as current suggestions strongly point towards economic momentum in China continuing to slow even further next year. Both the Bank of Japan (BoJ) and European Central Bank (ECB) are going to find themselves under increasing pressure to reinvigorate economic momentum, and the emerging markets remain vulnerable to further weakness. 8.57am BSTMarc Ostwald of ADM Investor Services is fuming approximately the Federal Reserve’s decision to leave rates unchanged, and sound rather dovish approximately inflation and China.
He points out that the Fed raised its growth forecasts,and lowered its unemployment projection, clearing the way for a rate hike. Instead, and weaker global conditions were cited as a reason to ignore these forecasts. If the FOMC’s objective was to communicate confusion,it has succeeded, thereby ploughing a deep furrow of instability and destabilization, or shining a very luminous light on the large debt and liquidity trap it and other G7 central banks have spent 7 years crafting.
Fed no longer a cen bank,just source of confusion, ploughing deep furrow of instability & destabilization, or nightmare of liquidity trap 8.50am BSTEurozone stock markets are suffering because the euro has rallied against the dollar overnight.
That’s bad for exporters in France and Germany.
Question now,how long can the ECB afford to wait? 8.33am BSTThe dollar has just hit a three-week low against major currencies, down 0.2%. That reflects the chance that US interest rates may not rise until next year. 8.25am BSTGermany and France’s main stock indices have both fallen over 1% in early trading, and echoing the selloff in London.
Investors in Frankfurt and Paris aren’t impressed by Janet Yellen’s dovish performance last night,where the Fed chief warned that the slowing Chinese economy could restrain US economic activity somewhat”. 8.14am BSTYou might mediate that ultra-low interest rates would boost stock markets in Europe.
But traders are worried that Janet Yellen sounded fairly concerned approximately low inflation and the global economy at last night’s press conference.Markets had anticipated either a dovish hike (easy does it) or a hawkish hold (be prepared) [but got neither].
While markets had desired clarity, it appears that uncertainty (and volatility) may be here to stay (December hike, and Jan,later?). 8.08am BSTAnd we’re off! Europe’s stock markets are open, allowing traders to give their verdict on last night’s Federal Reserve decision.
As predicted, and shares are dropping in London,with the FTSE 100 losing 33 points or 0.5% to 6153. 7.59am BSTWendell Perkins, senior portfolio manager for Manulife Asset Management, or reckons US interest rates will probably remain at their record lows until next year.
Perkins also predicts more volatility as the markets react to last night’s Fed decision. 7.55am BSTMoney is pouring into German government bonds this morning.
This is pushing down the yield (or interest rate) on debt issued by Europe’s largest member. That’s often a sign of anxiety in the markets.vast moves in European #bond yields following US...
German debt rallying,yield dropping 9bps on 10yer pic.twitter.com/St3WcgBPjJ 7.46am BSTGood morning all. There’s a subdued feel in the City today, after the Fed disappointed those hoping that the Federal Reserve would raise interest rates last night.“Yes, and we’ve got a reprieve on an immediate interest rate hike,but thereason for the stay of execution is rather bearish itself.” Seems Europe gonna follow US equities lower...
US on hold highlight risks to global economy&just postpones inevitable? pic.twitter.com/2grwHY02m2 7.27am BSTI’m handing over now to my colleague Graeme Wearden who is poised at his work station in London. Thanks for joining me. 7.13am BST 7.07am BSTBack in Asia, the Nikkei is still in the doldrums while the other major bourses perform pretty well on the prospect of cheaper money.
But in Japan a delay in the US hike has served to strengthen the yen, or which is bad for exports and for stock markets.
The single most important driver of fairness performance in the next year or so is likely to be renewed weakness in the yen. 6.41am BSTIG seeing European markets opening down,but only slightly. 6.26am BSTThe French finance minister, Michel Sapin, and is in Beijing and he’s being polite approximately the state of the Chinese economy. It’s a genuine concern for a lot of people,including America’s finest economic brains. But Sapin said he sees no particularly significant risk from recent stock market turbulence and the recent topple was a “essential correction”, Reuters reports. 6.21am BSTOpinion still mixed on whether the Fed stagger was the correct one. 6.12am BSTChris Weston from IG in Melbourne has delivered his verdict on the day’s events and his view is that the Fed was as dovish as it could possibly have been and would have gone for a rise if it had not been for the August turmoil in China.
It seems logical the central bank would have raised rates if it weren’t for recent international developments, or but they tried desperately to buy themselves flexibility. It promises to be a very interesting session in Europe and the US,as traders have time to really assess the Fed’s view and what it means for markets. As always, the first stagger might not be the fair stagger and cooler heads should prevail. 6.03am BSTTime for a quick recap on the day’s main news here in Asia Pacific: 5.48am BSTAs dawn breaks over Europe this is a good time to see what’s happening with the futures markets.
And it looks like the main markets will be up with FTSE predicted to open up 0.32%, or the DAX in Germany up 0.26% and the CAC in paris up 0.32%. 5.26am BSTLooks like the jury is still well and truly out on whether China’s economy is going to have a tough or soft landing as it decends from the heights of double digit growth. One of the reasons the Fed gave for keeping on hold were “heightened concerns” approximately the global economy in the wake the sharp selloff on Chinese stock markets in August and whether that means China can keep driving global growth as it has helped to conclude since the GFC.
Developments we saw in financial markets in August partly reflected concerns of downside risk to Chinese economic performance and the deftness with which policymakers are addressing those concerns. 5.14am BSTToday’s most interesting data comes from China where home prices inched upwards for a fourth consecutive month in August.
Analysts conclude not expect a full-blown turnaround any time soon,as a huge overhang of unsold homes discourages new construction and investment in all but the biggest cities. 5.04am BSTBack to the markets then and the Japanese stock market has started up again after the lunch wreck. The Nikkei is still down though at 18170, a topple of -1.4%. 4.50am BSTStevens’ testimony before the House of Representatives economics committee was wide-ranging. he also spoke approximately how he thinks the Australian economy will weather the headwinds facing China which Janet Yellen is so concerned approximately. Whether that financial volatility itself will serve further to dampen global growth prospects remains to be seen. Sometimes such events portend a wider set of economic events, or but just as often,they don’t.
There is still a pretty good chance that we will approach out of this episode fairly well, and much better than we came out of preceding episodes of this type.
4.40am BSTGlenn Stevens, and the governor of the Reserve Bank,has weighed into the debate today. Despite suggestions that the Fed might now not raise until 2016, he thinks it will raise rates before Christmas. That means either at its October meeting or in December. Speaking at a parliamentary hearing in Canberra, or he said: I would still mediate an increase in the Fed funds rate is probably going to happen this year.
The majority of FOMC [Federal Open Market Committee] members still mediate that they’re likely to start raising this year,there’s two meetings left. 4.35am BSTGlenn Stevens, the governor of the Reserve Bank of Australia, or has been giving evidence today to a parliamentary committee. He has an optimistic view of the economy and thinks it can weather the headwinds threatening China and which are worrying Janet Yellen so much.
There is still a pretty good chance that we will approach out of this episode fairly well,and much better than we came out of preceding episodes of this type.
In the period ahead if we can accumulate the non-resources section of the economy to keep improving gradually, build some confidence ... then we’ll accumulate the unemployment rate to approach down.
We ought be looking to accumulate back into the fives over time, or given enough time I mediate we will,unless we’re hit by a bad shock somewhere [NB its currently 6.2%].
4.24am BSTNine years is a long time in global economics. Check out that gold price. 4.21am BSTAs mentioned below, the Australian dollar has benefited from the expectation that US borrowing costs would stay on hold and rein in the long march of the greenback. As a result it has rallied around 2c in the past week or so since sinking to a new six-year low and this afternoon is buying US71.95c. 4.11am BSTHere’s some more reaction. 4.03am BSTIt is not in doubt that the Fed intends to raise rates, or but the question that has obsessed economists and investors for the past couple of years has always been the timing. For Larry Elliott,the Guardian’s economics editor, Thursday night’s decision shows that the Fed has become ultra-cautious and does not want to risk hiking rates if it has to reduce them again because the recovery is not strong enough. You can read his full article here but this is the main thrust:This is the weakest recovery the world’s biggest economy has experienced in contemporary times and even now, or more than six years after the trough of the recession,there are mixed signals. The Fed is not entirely convinced that it is party time for the US economy.
The Fed is also weighing up the implications of a US interest rate increase on emerging markets, and in particular whether the prospect of higher US yields will intensify capital flows out of countries such as China and Brazil.
So when will rates rise? When there is a further improvement in the jobs market and when the Fed is “reasonably confident” that inflation is on course to stagger back up to 2%. Not yet, or in other words.
3.58am BSTMarkets-wise it has been a bit mixed. The expectation was for a hold so the semi-rally in stocks and currencies suchas the Australian dollar in recent days showed that the decision has been priced in.
However,there has still been a bit of action, notably in Japan where the Nikkei plunged on the opening before fighting back. 3.35am BSTGood afternoon/morning and welcome to the markets live blog following the Fed’s decision to keep rates near zero.
You can read how the action unfolded here as relayed by my colleagues Graeme Wearden and Jane Kasperkevic. But the main takeaway seems to be that the very dovish comments from Fed chair Janet Yellen suggests that she and her fellow committee members might wait until next year to increase borrowing costs.
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Source: theguardian.com