Fed taper starts. $85B to $75B

[Carmour]

“The Fed has decided to put the waiting world out of its misery, and start the taper that most economists believe is justified by the data,” said Rob Carnell, chief international economist at ING.

 

The central bank also emphasised that it would keep interest rates close to zero “well past” the point that the US jobless rate falls below 6.5 per cent – and said it wanted to see inflation heading back up towards its 2 per cent target before the first rate rise.

 

“This is a very dovish ‘taper-lite’, where the Fed has done its utmost to provide an offset with its forward guidance, notably on the inclusion of inflation in the unemployment threshold,” said Alan Ruskin, strategist at Deutsche Bank.

The S&P 500 equity index reversed an early decline to rise 1.7 per cent to a record closing high of 1,810. The CBOE Vix index of equity volatility, often called Wall Street’s “fear gauge”, was down more than 14 per cent.

 

The dollar also rallied strongly, pushing above Y104 to its highest level against the yen in more than five years. The euro was down 0.5 per cent at $1.3692 while the dollar index, a gauge of the currency ’s value against a basket of counterparts, was up 0.4 per cent.

 

US government bonds appeared largely unfazed by the Fed’s move, with the yield on the 10-year Treasury up 4 basis points at 2.88 per cent – roughly where it stood before the announcement. The two-year yield was just 1bp higher at 0.33 per cent.

 

But gold gave back an earlier advance to stand $10 lower at $1,219 an ounce.

 

Among industrial commodities , Brent crude settled $1.19 higher at $109.63 a barrel, although copper had a more cautious session. The metal edged back 0.1 per cent in London to $7,270 a tonne.

 

European equities moved higher ahead of the Fed announcement, albeit in relatively subdued trading, with the FTSE Eurofirst 300 climbing 0.9 per cent.

 

In Tokyo, the Nikkei 225 climbed 2 per cent, as the yen came under early pressure from data showing that Japan’s trade deficit had widened in November.

 

“The weak yen is largely to blame for the recent widening of the trade deficit,” said Marcel Thieliant at Capital Economics.

“As domestic demand accelerates ahead of the consumption tax hike, the deficit may well widen further in the near-term, but we should see a narrowing once the tax has been raised.”

 

Sterling also provided some interest on the currency markets as it briefly broke back above $1.64 – and gilt prices fell – as expectations for an earlier than expected UK interest rate rise were stoked by robust jobs data.

The unemployment rate fell to 7.4 per cent, the lowest since April 2009, raising the chances that it would fall below the Bank of England’s 7 per cent threshold next year.

 

The minutes of the December meeting of the Bank’s Monetary Policy Committee, meanwhile, highlighted concern among members about sterling’s recent robust performance.

 

“The Bank of England continues to stress that while the economy’s improved growth performance is welcome, it is still some way from returning to normality and significant headwinds remain, so interest rates need to remain down at 0.5 per cent for some time to come,” said Howard Archer, chief UK economist at IHS Global Insight.

 

Nevertheless, the pound was up 0.8 per cent against the dollar at $1.6387 – in spite of the US currency’s post Fed announcement rally – while the yield on the 10-year UK gilt rose 5bp to 2.93 per cent.

 

There was also further positive news on the German economy, as the Ifo institute’s business climate index increased to 109.5 this month, the highest reading since April 2012.

 

“Judging by the ‘flash’ purchasing managers’ index released earlier this week, and this Ifo survey, the German economy remains on track to outperform its euro area peers over the near term at least,” said Grant Lewis at Daiwa Capital ­Markets.

[Wt_know]

$75B printing per month is still very very shiong for USA and very very leathal for the market with cheap money running like tape water

interest rate remain extremely low for the entire 2014 ... this increase buying interest ... huat ah !!!

Edited December 19, 2013 by Wt_know

[Vega]

I think US will be forever indebt till this earth vanish.

[Freestylers09]

taper or not taper,pennies chiong can liao..lol

[Celicar]

How shiong it is for US is nothing compared to the shiong-ness for the man in the street. Wages not keeping up with the inflation that comes with the QE, money in the bank devalue at crazy speed through no fault of the common man, end up want to compensate for such forces means must take risks and invest in the hope of getting better returns.

 

The financially prudent are the victims of the sins of the financially reckless.

$75B printing per month is still very very shiong for USA and very very leathal for the market with cheap money running like tape water

interest rate remain extremely low for the entire 2014 ... this increase buying interest ... huat ah !!!

 

[Wt_know]

you are right

gambler gamble and saver pay for the debt

saving money in the bank means losing money ... literally by devaluation + inflation

 

How shiong it is for US is nothing compared to the shiong-ness for the man in the street. Wages not keeping up with the inflation that comes with the QE, money in the bank devalue at crazy speed through no fault of the common man, end up want to compensate for such forces means must take risks and invest in the hope of getting better returns.

 

The financially prudent are the victims of the sins of the financially reckless.

 

 

Edited December 19, 2013 by Wt_know

[Roh96]

The world recession was started by US, but the price was paid by the rest of the world.

[Wt_know]

only if you are No. 1 (一哥 ) superpower in the world

big brother sneeze ... the whole world catch the cold

 

The world recession was started by US, but the price was paid by the rest of the world.

 

Edited December 19, 2013 by Wt_know

[Lala81]

The world recession was started by US, but the price was paid by the rest of the world.

 

AMDK mah.

[Mockngbrd]

AMUUURRICCA!!!

[LiuDeHua]

When is the taper to $55M slated to be?

 

Yesterday, New Zealand became the 1st developed country to raise its interest rates.

When will America raise the interest rates?

[Goldbug]

Austerity versus growth version 3.0 at G20/IMF | Reuters

 

The Federal Reserve will end its program of bond-buying with new money later this month, a prospect that has already driven the dollar higher and created jitters about a reversal of money flows out of emerging markets back into the United States.

[Wt_know]

it's europe turn to print $70B per month ... huat ah!!!

now waiting for usa to announce QE4 ...

Edited January 22, 2015 by Wt_know

[Wt_know]

the greeks have answered draghi

Edited January 26, 2015 by Wt_know

[Jamesc]

the greeks have answered draghi

 

The Greeks have not been playing by the rules for all these years

 

What can EU do to them?

 

Anyway I support the Greeks I would rather be sitting on a beach in Greece

 

than working in a factory in Germany and the tax paid by the worker in Germany

 

will be given to the Greek sitting on the beach. Sounds like a good deal to me.

 

Why would they ever want to give that up.

 

[Jamesc]

it's europe turn to print $70B per month ... huat ah!!!

now waiting for usa to announce QE4 ...

 

QE was blamed for hot money coming to Asia

 

and driving up the price of property here in Singapore.

 

Does this mean now that EU is printing more money

 

hot money will come back again and drive property

 

prices up again?

 

[Wt_know]

there is no better position than no need to return/repay borrowed money ... huat ah!

portugal and italy might be watching every move at sidelines ...

 

 

The Greeks have not been playing by the rules for all these years

 

What can EU do to them?

 

Anyway I support the Greeks I would rather be sitting on a beach in Greece

 

than working in a factory in Germany and the tax paid by the worker in Germany

 

will be given to the Greek sitting on the beach. Sounds like a good deal to me.

 

Why would they ever want to give that up.

 

 

Edited January 26, 2015 by Wt_know

[Wt_know]

greece PM sibei smart huh ...

your enemy's enemy is your friend ...

Edited January 30, 2015 by Wt_know