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LCG Morning Call
FTSE -1 point at 6186
DAX -13 points at 10217
CAC -9 points at 4646

European equities are set to start little changed this morning as traders don’t know what to make of last night’s FOMC. Yes, we’ve got a reprieve on an immediate interest rate hike, but the reason for the stay of execution is rather bearish itself. Weakness at home and abroad kept the committee reluctant to make finances just a tad tighter for consumers and businesses in an already fragile environment. To muddy the waters even further, the Fed’s projections for growth and inflation were lowered. It’s a testament to the ascendancy of China that their mismanaged economy can now dominate US monetary policy. Want to know where US interests are going, then look east.

The Fed kept interest rates on hold with the decision based on downward pressure on inflation and risks to economic growth. The immediate reaction was a sharp rally in the Dow which lost steam rather quick and eventually went into reverse ending 98 points lower at 16,664.

Janet Yellen mentioning a strong dollar and unusually taking notice of what’s been happening abroad were the surprises. It did not bode well for the greenback despite hints that most officials still expect a rate hike sometimes this year. The EURUSD rose 152 pips to 1.1438 but retraced slightly in overnight trading.

Any signs of US economic strength were overshadowed by fears over global outlook and that reduced demand for crude sending the WTI prices 35 cents lower to $47.19. Gold was definitely saved by the Fed as no raise in interest rates maintained its appeal of alternative asset. For how long it’s a different matter.