Global stocks rise after Fed, Japan leave rates unchanged

The precious metal is heading for the biggest weekly advance since July after United States central bankers opted once again to leave interest rates unchanged while reining in their outlook for future increases.

All of this means that the risks of waiting a little bit longer to raise interest rates are low. Gold climbed $13.30, or 1 percent, to $1,344.70 an ounce, silver rose 33 cents to $20.10 an ounce and copper increased 4 cents to $2.19 a pound.

This is an honest admission by the head of the world’s most important central bank that the business cycle isn’t developing as they expected.

Education publisher Pearson was also weaker after Exane BNP Paribas downgraded the stock to “neutral” from “outperform”.

With the United States dollar likely to be “hindered” by the downward revisions from the FOMC, they suggest that the only way it will be able to rally in the period ahead will be if U.S. economic data starts to strengthen, helping not only to lift market expectations for a rate hike in December but also a far faster tightening schedule than what is now being priced in.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

For the rest of 2016, 10 out of 17 Fed members project just one interest rate increase this year.

Oil and gold rose strongly as traders realised there were three more months of sugar to play with before that rate hike happens.

Says Razaqzada: “Indeed, the Bank of Japan (Wednesday) promised to buy bonds until inflation overshoots its target, which could take several years given that Japan is now in deflation”.

Adding some support for the Fed to raise rates later this year, a report showed number of Americans filing for unemployment benefits unexpectedly fell last week to a two-month low.

Canada’s annual inflation rate in August dipped to a 10-month low of 1.1 per cent, the seventh consecutive month it has remained below the Bank of Canada’s 2.0-per-cent target, Statistics Canada said. But the United States economy has struggled to string together more than one month of above-average growth over the past year. ING analyst Hamza Khan said the Fed had been following a pattern of talking up a rate cut ahead of its policy meetings, but failing to deliver.

In its statement, the Fed acknowledged the case for raising interest rates has strengthened. On the other hand, HDFC Bank was down 0.37%. I have no interest in buying rallies, as we continue to see bearish pressure again and again.

At the meeting, policymakers also downgraded their forecasts for inflation and economic growth in 2016.

So while a December rate hike is possible, it is far from guaranteed…

While the Fed’s decision to keep rates steady has reduced market volatility for the moment, that could change, says Mike Materasso, senior vice president of fixed income at Franklin Templeton.