Updated throughout the day
September 18
Good evening. After reading the tea leaves overnight on the newest Federal Reserve policy statement, traders and investors headed to gold and bonds. Safety on, risk off. The Dow fell steadily all day, closing with a 1.74% loss. The S&P 500 was down 1.61%, and the Nasdaq dropped 1.36%. To review: The Federal Open Market Committee voted Thursday to hold steady on zero interest rates. The markets aren’t loving this move. And it’s not just because the Fed policymakers have said they are worried about the slowdown in China and its effect globally. Investors are worried that the Fed has been stripped of its power to act. The central bank is the de facto leader of global monetary policy. Inaction is making our partners anxious. The dollar is nearing a 3-week low and stock futures are off about 1%. Get ready now for the next month’s worth of: Will the Fed lift rates in October or December? It’s the longest running monetary reality show in the world.
Here’s what else you need to know:
Russia moves first fighter jets to Syria. At least four tactical fighter jets are at the growing airfield on the Syrian coast. Russia has already sent housing for up to 2,000 people, attack helicopters, choppers for troop transportation, and artillery. It’s not yet clear what Russia’s full intent is. Wall Street Journal (paywall)
Burkina Faso president freed. President Michel Kafando has been freed after being seized by the military coup Thursday. Prime Minister Isaac Zida is still under house arrest. BBC
Japan dumps dovish approach. The upper chamber of Parliament approved the controversial bills allowing the military to engage in overseas combat, a major shift since the island nation’s post-WWII pacifism. The bill will allow overseas combat for the Self-Defense Force in very limited circumstances. They were previously limited to humanitarian roles. CNN
Deutsche Bank pulls i-banking out of Russia. Deutsche has been making moves to significantly cut company costs worldwide. By the end of the year, about 200 investment bank employee in the Russian deal advisory and securities-trading services will be affected. Technology, cash management, and other financial services employees will stay in place. Wall Street Journal (paywall)
Baby Doe identified. Law enforcement says it has finally identified the body of the young girl found in the Boston Harbor in June. The Boston police have been pushing a forensic photo of the girl, Bella Bond, around the area for months. The child’s mother and her boyfriend have been arrested in relation to her death. CNN
Despite everything, Asia ends week modestly higher. Friday was mixed post-Fed decision day. Asian stock markets went ‘huh?’ and bond markets rallied. The Shanghai and Hong Kong indices rose a modest 0.38% and 0.30%, respectively. Markets in Jakarta, Kuala Lumpur, and Tokyo were all down.
Danke, Janet. With Yellen & Co. keeping rates unched, European bond yields are starting to drop like flies. German 10-year bund yields have fallen 0.09% to 0.688%, while Portuguese and Italian 10-year bond yields slide to 2.532% and 1.793% respectively. Grazie mille, Signora Yellen! Financial Times (paywall)
1MDB “misplaces” another $1 billion. As if it wasn’t bad enough that $700 million of its cash went into the prime minister’s accounts and that $1.4 billion due to a Middle Eastern counterparty vanished into thin air, Malaysia’s state fund 1MDB is now in the hot seat after a reported $993 million payment it made to the International Petroleum Investment Co. – Abu Dhabi’s sovereign fund – somehow never reached the emirate. Wall Street Journal
Distractions: The Pope heads to Cuba on Saturday; New York Fashion Week ends and London starts; rubgy World Cup began with England vs Fiji.
China relaxes rules for trafficked kids. China has relaxed rules for the legal adoption of trafficked or abandoned Chinese children, state media reported on Friday, as the government works to combat the pervasive problem. Channel News Asia
Boko Haram displaces 1.4 million children. Fear of attacks by Boko Haram, the Islamist extremist group of northern Nigeria known for its deadly marauding and kidnappings, has uprooted a half-million children in the past five months, Unicef said in a report released Thursday. New York Times
You won’t believe this:
Selfies take another life. A Japanese tourist died from head injuries after falling down the stairs at the Taj Mahal. The tourist was taking a selfie at the time. One of his colleagues fractured his leg during the fall. BBC
Debate fight! Rand Paul’s aide, John Yob, says Marco Rubio’s aide, Rich Breeson, punched him in the face at a bar Thursday night. The incident was caught on camera. A source says the sucker punch was personal, not political. Vox
Thai cadets forced to smash iPhones with bricks. Students obeying an “honour code” destroyed their phones with bricks after they were discovered with the banned item. Someone, of course, made a video and the rest is history. BBC
Photo: Global Panorama