General Trading Chat
- Thread starter timepass
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Fed keeping the interest rates unchanged is not totally unexpected. Looking at Chinese economy slowing down ,many expected that Fed may like to wait for some more time before they increase the rates.
China is slowing down and it is the second largest economy in the world and it is like a running locomotive engine. It will not come to halt suddenly and will continue in direction of slow down for some more time. The world is keenly watching whether China does soft landing or hard landing and the market regulators will do their best to ensure that the landing is soft landing and not making too much disturbance in the financial markets. That said, the China will continue slowing some more time is almost certain.
India is in much better position to respond to this slow down than other emerging markets economies for so many reasons. FII money can be classified in two catagories 1) EM dedicated Funds and 2) ETF and Allocation Funds. The former funds are comfortable investing in India and in fact may consider an opportunity should Indian market go down 5-10 %. The second catagory ie ETF and Allocation money may see redumption pressure as they have to sell when there is redumption. And India is most liquid market with no restrictions on selling (which is a sign of healthy market with no restrictions on funds getting out.).
How does Indian market respond to all the above ? Today or in near future if we go above and sustain above 8000 Nifty, then we may get a short covering move which may take nifty to 8150-8200 in the expiry week.If we sell off from current levels, we may see lower levels in days to come. The key to market stabilizing is Indian growth making itself apparent in the corporate numbers on the ground. Till we get corporate earnings growth, the strong uptrend is not going to come.
Smart_trade
China is slowing down and it is the second largest economy in the world and it is like a running locomotive engine. It will not come to halt suddenly and will continue in direction of slow down for some more time. The world is keenly watching whether China does soft landing or hard landing and the market regulators will do their best to ensure that the landing is soft landing and not making too much disturbance in the financial markets. That said, the China will continue slowing some more time is almost certain.
India is in much better position to respond to this slow down than other emerging markets economies for so many reasons. FII money can be classified in two catagories 1) EM dedicated Funds and 2) ETF and Allocation Funds. The former funds are comfortable investing in India and in fact may consider an opportunity should Indian market go down 5-10 %. The second catagory ie ETF and Allocation money may see redumption pressure as they have to sell when there is redumption. And India is most liquid market with no restrictions on selling (which is a sign of healthy market with no restrictions on funds getting out.).
How does Indian market respond to all the above ? Today or in near future if we go above and sustain above 8000 Nifty, then we may get a short covering move which may take nifty to 8150-8200 in the expiry week.If we sell off from current levels, we may see lower levels in days to come. The key to market stabilizing is Indian growth making itself apparent in the corporate numbers on the ground. Till we get corporate earnings growth, the strong uptrend is not going to come.
Smart_trade
5 key takeaways from the FOMC announcement:
The following excerpt from the first paragraph of the Fed statement is a clear signal that China is very much on the Fed’s radar and likely played a significant factor in the decision not to raise: “The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad.”
It’s all about inflation, or rather, lack of inflation:
The lower end of the Fed estimates has PCE inflation consistently undershooting the Fed’s 2.0% mandate through 2018 and the median estimate doesn’t reach 2.0% until 2018.
Gold spiked higher and the US dollar tumbled lower following the announcement in a clear sign that the market views the Fed’s decision as more dovish than anticipated:
The vote was 9-1 in favor of leaving rates unchanged (only hawkish Fed member Jeffrey M. Lacker voted against). This is an indication that the Fed might be at least a couple of meetings away from a hike.
One Fed member (we don’t know which one) is projecting a negative Fed Funds Rate through the end of 2016!
Fed-Fund ProjectionsFed-Fund Projections
Notice the range of projections on the right side range from -0.1 to 0.9 this year and then -0.1 to 2.9 next year
This is a dovish announcement with lots of dovish nuggets contained within. Regardless of how much Fed Chair Yellen tries to walk it back and pretend to be hawkish during the press conference, markets have been given a green light that the Fed is on hold for a while longer (probably at least 6 months). Low inflation continues to be a challenge and with China currently presenting a big question mark there seems to be a much greater threat of low inflation/deflation than there is of staying at zero for too long and creating undesirably high inflation.
This is a clear positive for risk assets such as equities, precious metals and real estate. On the other hand the US dollar should come under pressure and we should see some retracement of the recent rally in bond yields.
The following excerpt from the first paragraph of the Fed statement is a clear signal that China is very much on the Fed’s radar and likely played a significant factor in the decision not to raise: “The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad.”
It’s all about inflation, or rather, lack of inflation:
The lower end of the Fed estimates has PCE inflation consistently undershooting the Fed’s 2.0% mandate through 2018 and the median estimate doesn’t reach 2.0% until 2018.
Gold spiked higher and the US dollar tumbled lower following the announcement in a clear sign that the market views the Fed’s decision as more dovish than anticipated:
The vote was 9-1 in favor of leaving rates unchanged (only hawkish Fed member Jeffrey M. Lacker voted against). This is an indication that the Fed might be at least a couple of meetings away from a hike.
One Fed member (we don’t know which one) is projecting a negative Fed Funds Rate through the end of 2016!
Fed-Fund ProjectionsFed-Fund Projections
Notice the range of projections on the right side range from -0.1 to 0.9 this year and then -0.1 to 2.9 next year
This is a dovish announcement with lots of dovish nuggets contained within. Regardless of how much Fed Chair Yellen tries to walk it back and pretend to be hawkish during the press conference, markets have been given a green light that the Fed is on hold for a while longer (probably at least 6 months). Low inflation continues to be a challenge and with China currently presenting a big question mark there seems to be a much greater threat of low inflation/deflation than there is of staying at zero for too long and creating undesirably high inflation.
This is a clear positive for risk assets such as equities, precious metals and real estate. On the other hand the US dollar should come under pressure and we should see some retracement of the recent rally in bond yields.
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