Global markets rejoice as Fed launches QE3

By Gautam Broker, Research Analyst at CNBC-TV18

Markets rejoice as Fed delivers; open ended QE3 launched

Federal Reserve has maintained its funds rate at 0.0%-0.25% ‘atleast until mid-2015’.

Fed said it would purchase USD 40 billion in mortgage backed securities every month. It has not defined maximum purchase target or duration of program.

Fed will exit only when labor market conditions have improved substantially.

MBS action is not specific to just to residential or commercial securities.

Additionally Operation Twist will be continued till the end of the year as announced in June.

So in total Fed's holdings of longer-term securities rose by USD 85 billion per month till year end.

Growth forecasts upgraded by Fed; now 2013 growth is seen at 2-5-3.0% and 2014 growth at 3%-3.8%

US data: Initial jobless claims came in weak, which increased by 15,000 on week at 3,82,000 as against 3,67,000 while expectations stood at 3,70,000

US PPI stood at 1.7% in August as against 0.3% rise in July and expectation of 1.4% rise.

US markets at close: Dow Jones rose 1.6% to 13,539.9 and S&P 500 Index went up 1.6% to 1,460. Nasdaq Composite was up by 1.3%.

Dow Jones and S&P 500 closed at their best since December 2007. Nasdaq was at a near 12-year high.

European markets at close (before the QE): DAX declined 0.45% and CAC was down 1.2% while FTSE gained 0.7%. Spain lost 0.7% and Italy fell 1.1%.

Today; SGX Nifty rallied 2% to 5553. Asian markets gained 0.6%-2.5%.

Currencies

Euro rose to 1.30 against the US dollar as expected

Dollar index hit a low of 79.18 yesterday, which was languishing at around 79.22 today.

Yen was at a 7-month high at 77.1 to the dollar.

Australian dollar was getting closer to high of 1.061 against the US dollar

Commodities

Commodities saw marginal gains. CRB Index went up 0.5%.

Gold was the biggest mover as it hit a high at USD 1772 an ounce, up 2%  

Brent crude hit a session high yesterday at USD 117.5 a barrel, before rising 0.8% to close below USD 117 a barrel.

WTI crude hit a session high of USD 98.6 a barrel, before rising 1.5% to close at USD 98.3 a barrel.

LME closed USD 8075/tonne (which was before the QE3). Today it gained 1.5% at USD 8200 per tonne.

Today morning; Brent crude was at USD 116.5 a barrel and WTI crude stood at USD 99 a barrel.

US Copper futures jumped 2% and Gold was up 0.3% at USD 1777 an ounce

What to watch out for

Eurozone CPI

Eurozone Employment data

US Retail Sales

US CPI

US Industrial Production

US Consumer confidence