From Marc Chandler at Bannockburn Global Forex:
Overview: The Fed delivered the expected 75 bp rate hike, and although it says it will take into account the cumulative effect of past hikes and their lagged impact, the takeaway has been a hawkish message. Risk appetites have evaporated. The dollar is stronger, while stocks and bonds have been sold. Japan’s markets were spared due to the national holiday, but the other large markets in the area were sold, lead by the 3% decline in the Hang Seng. Europe’s Stoxx 600 gapped lower and is off almost 0.9% near midday. US futures are nursing small losses after yesterday’s stunning downside reversal. Benchmark yields are 11-15 bp higher in Europe, while the 10-year US Treasury yield is up nine basis points to 4.19%. The dollar rides high, gaining on all the major and emerging market currencies. Sterling has been hit the hardest ahead of the outcome of the BOE meeting that will be known shortly.
Rising rates and a stronger dollar has weighed on gold and it is approaching the low seen in late September near $1615. Falling US inventories helped lift December WTI to a three-week high above $90 yesterday, but it is offered today below $88.50. US natgas continues to trade choppy and is down almost 4% today after rallying nearly 10% yesterday. Europe’s benchmark is flat after surging more than 50% over the past two sessions. Iron ore rose for the third consecutive session. It is up almost 6% over this run and matches the longest advance since July. December copper is off by 2.3%. If sustained, it would be the fifth decline in the past six sessions. With Russia rejoining the pact to allow Ukraine grain shipments, December wheat is extending yesterday’s 6.25% decline and is back at levels seen at the end of last week....
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.... America
Initially, the market read the FOMC statement dovish. The key element was acknowledging that it will take into account the cumulative effect of the past tightening and the lagged effect it has on the economy. However, as Powell spoke the markets reversed itself. Powell acknowledged as policy become restrictive the discussion of moderating the pace would become more appropriate and explicitly indicated that meant the next meeting or two. The futures market discounts almost a 30% chance of another 75 bp on December 14. Recall that the September dot plot showed the median Fed anticipated 125 bp increase in Q4. It is still early in the cycle, and there will be two more CPI reports before that meeting.....
....MUCH MORE
