Thursday, 22 August 2013

Didn't say yes, didn't say no

“Almost all participants confirmed that they were broadly comfortable with the characterization of the contingent outlook for asset purchases that was presented in the June postmeeting press conference and in the July monetary policy testimony.

Under that outlook, if economic conditions improved broadly as expected, the Committee would moderate the pace of its securities purchases later this year. And if economic conditions continued to develop broadly as anticipated, the Committee would reduce the pace of purchases in measured steps and conclude the purchase program around the middle of 2014.”

That's what the Federal Market Committee said about QE. So we are no further forward in truely understanding whether the Federal Reserve will begin to taper their purchase of long term US government stock before the end of the year. They might or they might not.

Despite this the Dow continued its downward trajectory with a spot of acceleration but little change in the volume of trade. Best that we can say is that the futures suggest that the decline will continue today/tomorrow. On the other hand the Asian markets seem unperturbed by the FOMC information. You can read a summary of what the Committee said about future policy here. It is couched in the most obscure language and I defy anyone to extract a clear message from their words. I wonder if they know what they are doing? (Early trading in the UK indicates that yesterday's sentiment has been reversed so the market seems to be deeply confused. Not surprising given the mixed messages that have been given.)

I can give myself a little pat on the back for sitting this one out.

The UK market is much the same. It fell in anticipation of what the FOMC minutes would say. If the Bank of England's new Governor was trying to reassure the market with the opening words of his tenure he seems to have failed.

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