Markets Reel As Fed Hints No More Easing

The Fed hinted that this could be the end of further easing in the U.S., and markets were sent reeling. This means a possible winding up of the monthly $85 billion asset buying by the end of next year, depending on the outcome of the economic situation by the end of 2013 and 2014. Bernanke predicted a strong outlook with growth each quarter gaining 2.6 per cent and the rate of unemployment to shrink to 6.5 per cent. Bernanke insisted that the low range of interest rates from 0 per cent to 0.25 per cent would be kept in place until unemployment falls from 7.6 per cent to 6.5 per cent.

While the USD gained, U.S stocks made serious losses after the meeting as the market comes to terms with the cessation of further stimulus. Further into the Asian session Chinese manufacturing data was at 9 month lows. The PMI index dropped to 48.3 this month from 49.2 in May, showing contraction in the Chinese economy. This comes after the World Bank lowered its growth outlook for China from 8.4 per cent to 7.7 per cent.

Stocks
Both U.S. and Asian Markets went wild after the cessation of the 2 day Fed meeting yesterday. This was followed by very bad data from China which saw the Shanghai Composite falling 1.21 per cent. Australia who is China’s biggest trading partner was also hurt by the news with the ASX 200 Index dropping 1.31 per cent. Meanwhile the Nikkei 225 was down 1.59 per cent even with the USD/JPY up.

U.S. stocks plummeted too, with the DJIA finishing 1.35 per cent lower, the S&P 500 fell 1.39 per cent and the NASDAQ down 1.12 per cent by close if US session.

European stocks were not left unscathed they opened today lower with the EURO STOXX 50 down 2.43 per cent. The French CAC 40 was down 1,75 per cent, and the German DAX 30 was down over 2 per cent.

Forex
The USD was up in the Asian session with the EUR/USD falling 0.20 per cent, the GBP//USD fell 0.18 per cent and the USD/JPY gained 0.58 per cent.

Commodities
The news from the U.S. hit the commodities hard too, with traders keeping away from the metals. Gold fell 2.22 per cent, Silver was down 2.59 per cent and Crude was down 1.75 per cent after investors took profits in the Asian session.

What to watch today:

As the markets continue to digest the news from the U.S., both France and Germany will release manufacturing data this morning and jobless numbers will be released later in the U.S.