Are global markets happy with the Fed's move? We won't know until tomorrow

11/03/2010 3:37 pm EST


Jim Jubak

Founder and Editor,

$600 billion by June.

Add in the re-investment of interest and you get about $110 billion a month.

The Federal Reserve’s announcement on quantitative easing came in at about the Wall Street  consensus of $100 billion a month in Fed buying And as you’d expect from an announcement that met expectations, the reaction on the U.S. stock market has been, what shall we say, muted. The S&P 500 which opened the day at 1194, sank to 1184 (a 0.08% drop) before recovering to 1198, a 0.37% change on the day.

The reaction wasn’t much more violent on the bond and currency markets. The five and seven year Treasury bonds climbed in price and fell in yield—the Fed is expected to concentrate its buying in this part of the Treasury market. (In a supplementary statement the Fed said its purchases will show an average maturity of five to six years.) Longer-dated Treasuries, the 10-year and the 30-year fell in price and climbed in yield with the 30-year Treasury with the 30-year bond moving back above the 4% level.

On the news the dollar fell against the currencies of most of its trading partners—the Canadian dollar, the euro, and the pound all gained against the dollar. Gold rallied.

This afternoon’s move—or non-move actually—is only part of the reaction. With European and Asian markets closed by the time of the Fed’s announcement, investors in the United States won’t know what overseas markets think until those markets start to open later tonight and tomorrow morning (by U.S. time.)

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