ASIA’S DAY: Japan’s benchmark Nikkei 225 slipped almost 2 percent to 18,070.21, as the dollar weakened against the yen, sending export issues lower.
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The Fed’s resistance to raising rates can “undermine confidence” in the economy, Paul Sacks, a portfolio manager at Aurum Options Strategies in New York, said in a telephone interview before the policy statement was released.
Most analysts see the Fed again putting off the long-awaited increase to the benchmark federal funds rate, which has been locked at 0-0.25 percent since the 2008 crisis, giving the world a massive supply of cheap dollars.
Signs of a sharp slowdown in China have intensified fear among investors about the U.S. and global economy.
It’s been a tough two years for investors in gold, which fell into a bear market in April 2013, as a recovery in the USA spurred gains in stocks and lifted the dollar.
Yellen reiterated that market should pay less attention to the timing of the first interest rate increase and more attention to the expected path of rates. A rising interest rate environment could send that process into reverse.
However, continued encouraging news on U.S. employment, low gasoline prices and the publication of several upbeat economic indicators led other economists to believe that the Fed would act to raise rates this month.
The Federal Open Market Committee, the monetary policy decision body, will hold two policy meetings this year, in October and December.
Low rates would continue to make interest-bearing investments less appealing, helping to drive money into stocks.
The USA currency also dropped against the euro, which climbed to $1.1450, hitting a three-week high.
“Janet Yellen has stated before that she would rather wait too long than raise rates too soon and risk the recovery”.
Markets had trouble discerning what Yellen’s remarks bode for the future.
Meanwhile, John Longworth, director general of the British Chambers of Commerce, said: “Given the current global uncertainty, the Fed was right to keep rates on hold for now, and avoid exacerbating the problem”.
EUROPE SLUMPS: Germany’s DAX was down 3 percent while the CAC-40 in France fell 2.9 percent.
“Clearly they’ve given up on any acceleration in the USA economy in the second half of this year compared to the first half this year”, he said.
Commodity prices were relatively well-supported with US crude futures last trading at $46.83 per barrel, down slightly from Thursday’s high of $47.71 but still up nearly 5 percent on the week.
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So instead of rallying, stocks have turned sharply lower Friday. The yield on the 10-year Treasury note fell to 2.29 percent.
