The US Federal Reserve kept interest rates on hold at its meeting overnight. However the language of its post-meeting statement clearly signalled a balanced approach to the future course of interest rates, a contrast to its previous tightening bias. Markets immediately responded to the potentially easier monetary conditions. The US dollar fell, bond yields dropped, shares surged, and precious and industrial metals found renewed support.

The Fed’s re-iteration of data dependency came at a good time. As a lead in, German import prices slumped along with the CPI, French consumption shrunk, and UK consumer credit grew more slowly than expected. Then, as US agencies continue to catch up on data delayed by the government shutdown, US consumer confidence and conditions fell, home sales dropped and house price growth slowed. The market gains were clearly focussed on potential sugar hits from the Fed.

On a brighter note the US company reporting season continued to deliver solid results. With around a third of the reports in, overall sales growth better than 5% is translating into earnings growth better than 12.5%. Telecommunications and industrials are leading the way, indicating a healthy US economy and underpinning the stock market gains.

Asia Pacific futures traders were cautious in response to the surge, with modest opening gains on the cards. One restraining factor may be stronger local currencies. The Singapore, Australian and New Zealand dollars all rose, as did the Yuan and Yen. Even the British pound squeaked out a gain, despite a widening chasm between British and EU views on the Irish border.

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