Federal Reserve holds interest rate, stresses "patience" on future hikes


Gold prices were trading relatively unchanged on the day and have pushed higher in initial reaction to the USA central bank's monetary policy statement.

■ In its statement on Wednesday, the Fed said "economic activity has been rising at a solid rate".

Of the companies in the Standard & Poor's 500 that have reported results for the final three months of 2018, 77% have delivered earnings growth that topped Wall Street's forecasts.

Advancing issues outnumbered declining ones on the NYSE by a 4.09-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored advancers.

Powell also said that financial conditions - stock prices and borrowing rates, for example - had become less friendly to growth.

The gains were matched in bond markets.

Royce Mendes, senior economist at CIBC World Markets said that Treasuries have rallied, pushing bond yields lower and the us dollar has sold off as the tone in the monetary policy statement were more dovish than expected.

But was all pain for the dollar. "Buy risk assets", Minerd said.

"We may yet get a (Fed) rate hike in June, but if what matters is where policy's heading in the medium term, the FX market would overlook that and sell the dollar anyway".

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Nifty futures on Singapore Exchange traded almost 70 points higher at 10,733 early this morning.

Apple shares had jumped nearly 7 percent after it soothed its China worries.

Meanwhile, the local share market is expected to rise at the open. But even modest increases have not been embraced by investors, with stocks tumbling in anticipation of a raise last month that boosted rates 0.25 percent to a range between 2.25 and 2.5 percent.

"What this has done has helped to ease financial market conditions and accordingly volatility and boosted equity prices, specifically in the US but globally as well".

Investors were also tracking the latest round of talks between Washington and Beijing that began on Wednesday, the highest-level meeting since U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce to their trade war in December.

If the two sides can not reach a deal soon, Washington has threatened to more than double tariffs on Chinese goods on March 2.

Weidmann also said the euro zone is likely to undershoot its inflation projection this year due to lower oil prices and the European Central Bank should look through this dip and not waste time unnecessarily in normalizing policy.

The Dow was up 421 points, or 1.7 percent, at 24,990. That disturbing reliance on wealth gains was noted in this space previously, most recently in this week's column. Both market moves have been bullish for gold prices.

Another sign of waning prospects for a rate hike this year was the drop in near-dated implied volatility on swaptions - options on United States interest-rate swaps - which dropped to the lowest since November for one- to two-year contracts.