Stock markets everywhere except the U.S. are in the red, as U.S. non-farm payrolls post astoundingly robust numbers, and the two previous months are revised upwards. Combined with the stronger than expected U.S. third quarter GDP, traders are growing markedly more certain that they will see Fed Chairman Ben Bernanke take away the “punch bowl” of easy money when he retires at the end of the year. It looks like tapering will be the main course at Christmas dinner, when the Fed reduces the $85 billion a month in purchases of bonds and mortgage-backed securities.
Curiously, it seems that Wall St. isn’t reacting in “good news is bad news” fashion today, and is actually opening higher. The DXY dollar index is solidly over 81, up over 0.5%. Yield on the 10-year Treasury has surged to 2.73% on the prospect of the Fed reducing its monthly presence in the bond market.
Gold plunged on the news, and temporarily broke $1,285 support on sell-stops before recovering. Silver, platinum and palladium were also affected to lesser degrees. Depending on where PMs close for the week, we may see a surge in physical demand out of Asia. That will depend on what comes from the special Chinese Communist Party policy meetings starting tomorrow. People may be extra cautious ahead of the results from the meeting. From recent government announcements, a renewed campaign against corruption at the provincial and local levels is in the cards, as well as more mandated reduction in sectors with excess capacity, such as cement and steel.