In a move that surprised many, the Federal Reserve refrained from tapering stimulus yesterday and precipitated heavy losses in the U.S. dollar. However, the losses were short lived as the U.S. made significant gains against the major currencies overnight as investors had more time to consider why the Fed failed to move at this meeting. The decision by the Federal Reserve is at its core a reflection that all is not yet well with the U.S. economy and that more time is required before the economy can stand on its own feet without the support of an accommodative monetary policy. In other words, why are markets rallying and risk currencies rising when the most powerful central bank in the world considers that there are still risks to the world's largest economy?
In a statement that is seen as highly controversial by the more conservative forces within the Catholic Church, Pope Francis has said that the church should not be "obsessed" with preaching about issues such as gay marriage, abortion and contraception and should try harder to reach out to a broader congregation. He told the La Civilta Cattolica publication "it is not necessary to about these issues all the time" and added, "we have to find a new balance, otherwise even the moral edifice of the Church is likely to fall like a house of cards, losing the freshness and fragrance of the gospel." Pope Francis, who is the first non- European pope in more than a millennium, is widely viewed as a much more consultative pope than the previous one who has made numerous overtures to other faiths during his papacy.
U.S. equity markets have given up the gains which saw the S&P 500 rise to a record high yesterday. The jubilation of the stimulus junkies over the Fed decision to leave its bond purchase programme alone has dissipated and we are likely to see further losses as investors come to the realisation that the Fed does not yet have the confidence in the U.S. economy to let it operate with less stimulus. The S&P 500 has closed 0.18% lower at 1,722.34. Earlier in Europe, markets gained on the aftermath of the Fed decision with the DAX gaining 0.67% while the FTSE surged 1.01%.
Commodity prices were the big winner from the Fed decision to not taper stimulus yet with the major indexes again rising another 0.3%. WTI has given back most of its strong rise in yesterday's session after Libya's oil output rose and Syria's President Assad said he will allow access to chemical weapons facilities to international inspectors. WTI fell 1.7% to $106.30. Precious metals were steady after rocketing higher in response to the Fed. Gold is trading at $1,366 while silver is firmer at $23.10. Copper gained more than 2%. Agricultural commodities were mostly higher.
