Chinese Comments Push Down Stocks | Fed Members Calm Markets

After the shockwaves in the market that resulted after the end of the 2 day Fed meeting, Fed Reserve member Fisher tried to calm the markets by commenting that the Fed has made no decisions and is merely considering ‘dialing back” the monetary policy. The word “Exit’ is not relevant and “not appropriate” at this point. This pushed up the Asian markets at the start of the session.

The Nikkei saw an initial gain of nearly 1 per cent. The gains were quickly undone following China’s interbank rate, which plunged sharply after last week's rise that was brought about by The Peoples Bank of China promise to inject funds into the economy. The Bank signaled that commercial banks should be careful about how they manage their liquidit,y and that the tight credit policies would remain in place. As of late, the Peoples Bank stopped the flow of cheap liquidity in order to restrict the banks from their careless actions and to stem their dependency on credit. This caused concerns that the markets in China could be suppressed and in turn smaller lenders may go out of business.

Stocks
In Asia, initial gains were seen although these were quickly reversed by Chinas falling stocks after the PoBC announcement. The Shanghai Composite plummeted 4.78 per cent. Hong Kong’s Hang Seng fell 1.49 per cent, and the Japanese Nikkei 225 lost 1.91 per cent despite figures from Japanese corporate services price index, which grew by a seasonally-adjusted 0.3 per cent last month following a -0.3 per cent reading in the previous month. The Australian S&P/ASX 200 Index dropped 0.28 per cent which is logical, as China is Australia’s largest trading partner.

Forex
After the worrying Chinese announcement and the Fed's comments, Forex markets were mixed in the Asian session. The greenback saws further slight gains against its counterparts apart from the USD/YEN which dropped 0.28 per cent. The dollar was up 0.07 per cent against the EUR, as well the GBP and rose 0.20% against the AUD and 0.12 per cent against the Canadian Dollar. The USDX was up 0.06 per cent.

Commodities
The precious metals on the other hand were up as traders took advantage of well-priced commodities. Gold was up 0.07 per cent and Silver 0.25 per cent. Crude Oil continued its downwards trend, losing 0.34 per cent as investors shrugged off the closure of a Canadian oil pipeline as they were calmed by Fed comments on further QE possibilities.

What to watch today
Expect further volatility following Chinese comments and potential further Fed members' comments. This morning sees Italian retail sales data and U.K. mortgage approvals, then later in the U.S session sees Home sales releases which should drive that session.