Eagle Eye Opener

Fed Keeps ’em Guessing as to When Tapering will Start; Fed’s Non-Event Deflates Emerging Market Currencies and Shares; Developed Nations Rise on Good News out of China and Europe

Fed Keeps ’em Guessing as to When Tapering will Start (Bloomberg)

Although the minutes from the Federal Reserve’s recent meeting indicate broad support for reducing the Fed’s $85 billion a month stimulus program this year, no specific start date has been determined. The caveat here is that the tapering will begin as long as the U.S. economy continues to strengthen. However, that time is not yet here, as reflected in the following quote from the meetings minutes: “Almost all committee members agreed that a change in the purchase program was not yet.” So, what’s an investor to do? Imitate the Fed and put a decision off until the Federal Open Market Committee’s (FOMC) next meetings on Sept. 17-18.

Fed’s Non-Event Deflates Emerging Market Currencies and Shares (Reuters)

Emerging market currencies and shares both fell today on the news, or lack thereof, regarding a specific start date for reduction of the Fed’s stimulus program. India and Turkey were two of the countries hit the hardest, with both of their currencies hitting an all-time low against the dollar. Currencies in Indonesia, Malaysia and Thailand fared a little better, but all three of those countries saw their currencies hit multi-year lows. If you’re an investor in those currencies or markets, and looking for another place to your park your investable funds, think domestically. The yield on the U.S. Treasury’s 10-year note hit a two-year high of 2.9 percent while the dollar rose 0.25 percent against a basket of major global currencies.

Developed Nations Rise on Good News out of China and Europe (AP)

Investors did receive some good news yesterday, as well: “solid economic figures” out of China and Europe. In HSBC’s most recent purchasing manager’s index (PMI) survey, China’s 50.1 score in August indicates that the country is back on track for economic growth, and that number is especially optimistic following a July score of 47.7. The PMI for Europe’s 17-country Eurozone came in at 51.7, up from 50.4 in July, indicating continued economic expansion as the region continues to break out of its recession. And the United States looks as if it will build on China and Europe’s momentum today, with both Dow and S&P 500 futures slightly up at the time of this writing.

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