The emerging market relief rally continued through Asia Pacific trading overnight in the wake of Turkey’s surprise massive interest rate increase, but as trading has moved into Europe and North America enthusiasm has faded. Indices on both sides of the Atlantic have turned lower again today while gains made by TRY overnight. To show just how fast this rebound has faded, a rally attempt by ZAR off of South Africa’s surprise rate hike lasted only about two minutes and the currency has since weakened. This morning’s action indicates that traders have started to recognize that emergency surprise moves like this to shore up currencies could end up making struggling economies underlying problems even worse. These surprise moves, which suggest some emerging market central banks have started to panic, put even more pressure on the Fed to act today. As the central bank for the world’s reserve currency, the Fed has now come under more pressure to act as a beacon of stability and consistency. The transition in the Chairman’s role from Dr. Bernanke to Dr. Yellen taking place this week is all about consistency over change. If the Fed were to decide today not to continue its tapering program it could send a signal that the Fed is panicking as well, so another $5-10B taper appears likely with dissent if any coming from those wanting the Fed to hold off. The prospects for more Fed tapering today and growing emerging market concerns have been the two main factors driving markets overnight. The combination of both has sent indices in the US and Europe tumbling this morning. USD is picking up on tapering expectations, but defensive plays like gold and JPY that often would be expected to weaken on greenback strength are up sharply on emerging market fears. Interestingly, CAD is having a better day as it rebounds from recent weakness in what looks to be another trading correction. NZD has been quiet so far but could get more active later in the day with an RBNZ decision due an hour after the Fed. Traders may look to the RBNZ for signs on when it intends to start carrying out its plans to start raising interest rates this year. NZD has rallied on rate hike anticipation and could weaken if tightening is delayed. Natural gas is trading back above $5.00 again as the polar vortex continues to boost heating demand across consuming regions. Recall that peak demand seasons for natural gas are winter (heating) and summer (cooling) seasons which can influence trading in that market throughout the year. Corporate News Boeing $1.88 vs street $1.57, F2014 guidance $7.00-$7.20 short of street $7.52 F2014 sales guidance $87.5-$90.5B short of street $92.7B Yahoo! $0.46 vs street $0.39, Dow Chemical $0.65 vs street $0.43, 15.6% dividend increase Valero Energy $1.78 near high end of $1.60-$1.80 guidance range Phillips 66 $1.34 vs street $1.11 AT&T $0.53 vs street $0.51 Canadian Pacific $1.91 as expected, guides 30%+ EPS growth for 2014 CGI Group $0.65 vs street $0.70 Economic News Significant economic announcements released yesterday afternoon and overnight include: Turkey interest rate decision raised overnight rate to 12.00% from 7.75% Raised benchmark rate to 10.00% from 4.50% South Africa interest rate decision surprise 50 bps interest rate hike to 5.50%, no change had been widely expected Singapore unemployment rate 1.8% as expected Spain retail sales 0.0% vs previous 2.0% Economic reports due later today include: 10:30 am EST US crude oil inventories street 2.2 mmbbls 10:30 am EST US gasoline inventories street 1.6 mmbbls 2:00 pm EST US interest rate decision 0.25% no change expected 2:00 pm EST US tapering decision $10B cut to QE purchases expected 2:00 pm EST US Treasury purchases $5B cut to $35B/month expected 2:00 pm EST US MBS purchases $5B cut to $30B/month expected 3:00 pm EST RBNZ interest rate decision 2.50% no change expected

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