Equities and commodities both took fright early this morning, after sleeping on the the latest FOMC update. Traders decided that the Fed did not panic enough, so panicked themselves. Of particular concern was that the Fed did not even mention the partial government shutdown which is estimated to have cost $25 billion of damage to the economy and shaved .3% from GDP. They also removed a phrase regarding concern over rising borrowing costs that had been included in last month's statement.
With no Bernanke press conference to guide them, traders have assumed the worst. Precious metals trended lower overnight on light physical demand in Asia, as Chinese traders worry about short-term liquidity due to central bank tightening and frantic Indians can't get any gold to buy at all, due to government restrictions. Precious metals took a hit in early morning trading on profit-taking, before resuming their slide.
A lot of this movement is on a sharply stronger dollar. Most of this gain is from a euro that has tumbled from recent highs on EU inflation numbers dropping to near four-year lows, and record EU unemployment numbers. This raises the possibility of rate cuts by the ECB at a time when jitters are returning of a tapering of U.S. quantitative easing. The dollar movement was constrained by a stronger yen, which saw light safe haven demand in Asia over concern about the Chinese banking system.
The Bank of Japan reiterated its commitment to using as much stimulus for as long as necessary, to hit its target of 2% inflation in two years. The Nikkei was down on weak earnings, and fears of a strong yen harming export companies. Hong Kong and mainland Chinese stocks took a hit over concerns over market liquidity and underperforming bank stocks.