Overnight US Market

18 September 2014 - 5:05 am
 

The Dow jumped to a record close Wednesday after the Federal Reserve reaffirmed that a key short-term interest rate will stay near zero for a “considerable time” after its bond-buying program ends next month.

Investors have been eagerly awaiting the Fed statement for clues on the timing and pace of interest rate hikes and were relieved the central bank maintained its current language on rates.

The Fed has maintained a near zero interest rate policy since the 2008 financial crisis, which has boosted stocks to record levels during a five-and-half-year bull market.

The Dow Jones industrial average rose 24.88 points, or 0.2%, to a record close of 17,156.85, and set an all-time intraday high of 17,221.11. It was the sixteenth record close for the blue chip index in 2014.

The Standard & Poor’s 500 index jumped back above the 2000 mark as it gained 2.59 points, or 0.1%, to 2001.57. The S&P 500 is about 6 points below its record close of 2007.71

The Nasdaq composite index rose 9.43 points, or 0.2%, to 4562.19.

The latest economic report gave the Fed more evidence that inflation remains a low threat as consumer prices fell last month. The consumer price index fell 0.2% in August, the Labor Department said Wednesday. It was the first drop in 16 months.

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Thought For A Day

18 September 2014 - 0:04 am

 

The six paragraphs from the Federal Reserve generate plenty of interest and debate.

Although the Fed on Tuesday stuck with its pledge to keep interest rates low for a “considerable time” after it wraps up its bond-buying programme next month, there were other changes.

In their tweaks, the Fed’s policymakers made a nod to lacklustre inflation pressures and, at the same time, the view that the jobs market has room to improve.

Below is a comparison of the changes from the September and July statements (via Nomura).

Perhaps not surprisingly – following Hilsenrath’s ‘leak’ – the FOMC has decided to keep the “considerable time” language alive-and-well in its latest statement, supporting the uber-dovishness rate guidance as QE is tapered as expected:

  • *FED TO END QE PROGRAM AT NEXT MEETING IF OUTLOOK HOLDS, RELEASES EXIT STRATEGY GUIDELINES
  • *FED WILL USE IOER RATE TO MOVE FED FUNDS INTO TARGET RANGE
  • *FED TO USE OVERNIGHT-REVERSE REPO `AS NEEDED’ IN EXIT
  • *FIRST RATE RISE SEEN IN 2015 BY 14 FED OFFICIALS VS 12 IN JUNE
  • *FED KEEPS ‘CONSIDERABLE TIME’ PLEDGE FOR LOW RATES POST-QE
  • *FED SEES MEDIAN FED FUNDS RATE AT 1.375% AT END OF 2015
  • *FED SAYS TIMING OF REINVESTMENT PHASE-OUT IS ECONOMY-DEPENDENT
  • *FED SAYS INFLATION `RUNNING BELOW’ FOMC’S LONG-RUN GOAL
  • *FED REPEATS SIGNIFICANT UNDERUTILIZATION IN LABOR MARKETS
  • *FED SAYS ECONOMY EXPANDING AT MODERATE PACE, LABOR MKT IMPROVED
  • *FISHER, PLOSSER DISSENT ON FOMC VOTE ON FORWARD GUIDANCE

Record high stocks, record low corp yields, surging GDP, PMIs soaring, housing and consumer sentiment exuberant, jobless claims at lows, JOLTS at highs, and the Apple iPhone 6 – if that doesn’t draw Yellen to the middle, we don’t know what will… but we are sure she’ll explain in the press conference. Full redline below…

Pre-FOMC: S&P Futs 1992.00, 10Y 2.56%, Gold $1235, WTI $94.20, USDJPY 107.50

FOMC Redline Sept 2014

Fed tapers bond buying by another $10bn

17 September 2014 - 23:37 pm
 

The Federal Reserve has tapered its bond-buying programme by another $10bn, as the US central bank continues to withdraw the stimulus it has given the world’s largest economy since the financial crisis erupted.

The move, which was widely expected, leaves the Fed’s purchases at $15bn a month and the central bank on track to wrap up its quantitative easing programme next month.

With the bond-buying programme on its final legs, the September meeting of the Fed’s Open Market Committee has been one of the most widely anticipated in months.

Janet Yellen, the Fed chairwoman, will hold a press conference at 2:30pm local time.

 

BADI BADI BAATEINThe Quacquarelli Symonds (QS) World University Rankings, regarded as the most rigorous of its type, has placed Massachusetts Institute of Technology (MIT) at the numero uno position for the third year in a row.

A total of 31 countries are represented in the top 200 in which the US is the dominant nation, with 51 institutions, ahead of the UK (29), Germany (13), the Netherlands (11), Canada (10), Japan (10) and Australia (8).

The top-placed Indian institution, the Indian Institute of Technology-Bombay (IIT-B) is ranked 222nd in the world, followed by IIT-Delhi at 235th, IIT-Kanpur at 300th, IIT-Madras at 322nd and IIT-Kharagpur at 324th position.

However, the number of Indian institutions in the rankings has grown to 12 from 11. >> Read More

 

Russia presents its toughest budget in years on Thursday, relying on optimistic forecasts for oil prices at a time when borrowing abroad to cover any deficit slippage will be tough due to tightening Western sanctions.

With the economy slowing to a crawl, the 2015-2017 budget proposes possibly tapping into the country’s reserves for the first time since the 2008 global crisis, while foreseeing an end to real wage growth, a struggle to tame inflation and a falling rouble.

The first budget since Russia’s costly seizure of Crimea fromUkraine keeps the deficit at a relatively modest 0.5-0.6 percent of gross domestic product for the three-year period.

However, the government of President Vladimir Putin faces a grueling challenge to make ends meet due to the weak economyand the effects of the sanctions, imposed by the United States and European Union after the annexation in March and tightened since then over Moscow’s support of Ukrainian separatists.

Deputy Finance Minister Alexei Lavrov has warned Russians to expect tight spending. “There cannot be more money in the budget than there is already: there is only as much as the economy generates,” he said earlier this week. >> Read More

 

“gamblers are willing losers who occasionally win”

That is, gamblers risk their capital on propositions where the odds are either:

- unknown to them
- cannot be known

- which actual experience has shown to have negative expectation
- or which they know with mathematical precision to be negative

They are rewarded for doing so on a random schedule and a random reward size, which is a pattern of stimulus-response which behavioral scientists have established as one which induces the subject to engage in the behavior the longest without a reward, and creates superstitious as well as compulsive behavior patterns. Because they have traded reason for emotion, they tend not to follow reasonable and disciplined approach to sizing their bets, and often over bet, leading to ruin. >> Read More

China’s Mixed Messages to India

17 September 2014 - 21:44 pm
 

 

Map of the Himalayas locating disputed borders and territory between China and India (Courtesy: Reuters).

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Technically Yours,
Team ASR,
Baroda, India.