IMF, The interconnected Global Economy Part 1

It is the interplay between the global economy and the U.S. economy on which I would like to focus today. In a world of increasing economic interconnections, the challenges facing the United States—and all of us—are greater; but so too are the opportunities. The question is how we can best come together—business leaders, labor groups, policymakers and others—to find the solutions that we need to secure a lasting, balanced, and widely shared recovery.

The Current State of the Global Economy
The advanced economies  are in a better shape than 6 months ago.We see that  growth is picking up here in the United States. For the first time in a long time, the Euro Area is also beginning to grow, although there is still much to be done. And while Japan’s reform efforts are ongoing, it is also doing better thanks to aggressive policy support

Emerging market countries are the other side of the story. In large part, they helped keep the global economy afloat during the crisis. Now, while still dynamic, their momentum is slowing. For some, this may be a shift toward more balanced and sustainable growth. For others, it reflects the need to address imbalances that have made them more vulnerable to the recent market turbulence.

The Global Economy and its interconnections and spillovers. The growing importance of global trade.

Since 1980, the volume of world trade has increased fivefold. And trade has grown in importance for global production. World exports relative to output grew from 20 percent in 1995 to 30 percent in 2008, before falling during the Great Recession, and recovering somewhat since.

There has also been the rapid acceleration of financial integration. 

We all have a large stake in these interconnections. What happens elsewhere in the world—be it the success of recovery in Europe or the continued smooth functioning of supply chains in Asia—matters increasingly for the United States. The converse is also true. What happens here matters increasingly for the global economy.

Source: Christine Legard

            Managing Director,International Monetary Fund

Euro Zone Crisis: EU tentatively approve change in the method to calculate structural deficits of its members

In an article published today in the Wall Street Journal the issue is the change in the methology
used by the EU for estimating the structural deficits of its members:
"European finance officials have tentatively approved a change to the region's budget policies that is likely to lighten the austerity required of Spain and other countries hardest-hit by the sovereign-debt crisis.

Spain and others argue that their deficits have been inflated mainly by the economic crisis, not by lax government spending and low taxes.

In a weak economy, with mass unemployment and many factories running at only a fraction of full capacity, government revenue is depressed and social spending is elevated".

The structural deficit in these circumstances will be lower than the actual deficit, representing the assumption that once the economy strengthens, the real deficit will naturally narrow, without cuts to government spending or tax increases that have proved politically toxic.

But Europe's current method for calculating the structural deficit has determined that much of the budget deficits seen in the bloc's weakest economies are structural, or built-in, not cyclical. That means they will persist even after the economy has returned to full strength. So austerity measures—spending cuts or higher taxes—are required.

The calculation is based on the commission's finding that even some of the bloc's weakest economies are operating relatively close to full capacity, which many of those countries dispute. They argue that the difference between the current state of the economy and full capacity is significantly larger than the commission's estimates.

The commission believes that the "natural" rate of unemployment—if the Spanish economy were operating at full potential—is 23%

The new methodology will lower estimates of the "natural" unemployment rate for crisis-hit countries, meaning that it will need to drop sharply for the economy to be considered operating at full potential.

JPMorgan top picks in Gold Producers

• Barrick Gold and Buenaventura look cheap among gold miners in the Americas, J.P. Morgan says while still giving both neutral ratings because of political risk; ABX has added uncertainty around its balance sheet.
• The firm says ABX’s cash flows have become more difficult to forecast, given uncertainty around two key assets: Fiscal problems in the Dominican Republic will channel half of the early cash flows from the Pueblo Viego project away from ABX, plus the negative ruling from the Chilean court has forced a halt to construction on the Chilean side of the Pascua Lama property.
• On BVN, the tax problem for Peru's resource industry was resolved but the Conga project has become tied up in political disputes linked to positioning for the next election.
• JPM prefers Buy-rated Goldcorp , Newmont Mining and Eldorado Gold 

         Source: Seeking Alpha

Sony Corp is betting on initial Playstation 4 sales to be 40% higher than its predecessor

Sony Corp is betting on initial Playstation 4 sales to be 40 percent higher than its last home game console which cost more to build and buy, raising the prospect of quicker return to help revive its consumer electronics business.

The console goes on sale at almost the same time as Microsoft Corp's Xbox One, and is the new flagship product for a gaming division that, along with cameras and mobile devices, is at the core of a plan to reinvigorate a business long weighed down by loss-incurring televisions.

Sony is targeting PS4 sales of 5 million machines between its November 15 United States launch and the end of the company's financial year on March 31, President and Group CEO of Sony Computer Entertainment Inc Andrew House said in a presentation at the Tokyo Game Show on Thursday.

Sony, like Microsoft, has extended its latest console further beyond gaming by making it a living room entertainment hub controlling movies, television and internet content.

House said Sony's game division is working with Sony Pictures to develop content that it could offer the 150 million Playstation network subscribers. Those projects, however, may remain in the pipeline longer than at its U.S. competitor.

Source: Reuters

BOJ Board Member cautious views of Japan recovery due to uncertainty in Emerging Markets

In an article published today in the Wall Street Journal,there seems to be among members of the board of BOJ a cautious approach of Abenomics given the current uncertainty in emerging market economies and the slow recovery of advanced economies.
Mr Takahide Kiuchi, Bank Of Japan Board member known for his cautious views highlighted the risks posed to Japan by overseas economies, saying growth in developed nations isn't yet strong enough to make up for the slowdown in emerging countries.
Japan is currently hoping higher exports, supported by a weaker yen, will help fuel domestic growth. But Takahide Kiuchi said weaker overseas economies won't bode well for exports.
Mr. Kiuchi also said he couldn't justify the BOJ taking any additional easing measures, despite his concerns that the health of overseas economies, the diminishing positive impact of the weaker yen and higher Japanese stock prices are having an impact on the domestic economy.

"I personally see slightly more downside risks [for Japan's economy], primarily due to heightened uncertainty in overseas economies, particularly in emerging countries," Mr. Kiuchi told business leaders in the city of Kushiro on the northern island of Hokkaido. "The recovery in advanced countries is not strong enough to offset the slowdown in emerging economies," Mr. Kiuchi, formerly chief economist at Nomura Securities, later said at a news conference.

He added that Japan may not be able to count on improvements in export conditions in the future, given the uncertainty in overseas economies".

Europe shares hit 5-year high as Fed stimulus remains

European shares rose on Thursday, with one benchmark index rising to a five-year high after the U.S. Federal Reserve surprised the market by delaying plans to scale back its stimulus measures.

Cyclicals and real estate shares led the rally, with global miner Rio Tinto gaining 1.4 percent and Unibail-Rodamco , Europe's biggest property group, surging 3.9 percent.

Gold miners also jumped, tracking a sharp rally in the precious metal as the U.S. dollar fell. Randgold climbed 8.3 percent and Fresnillo added 5.7 percent.

"The Fed's decision not to taper doesn't change the scenario, it just delays everything," said Oliver Pfeil, portfolio manager, global equities, at Deutsche Asset & Wealth Management, which has about 1 trillion euros ($1.35 trillion) in assets under management.

"The market now realises that it will take much longer to unwind quantitative easing, but at the end, economic growth will pick up, so going into cyclical stocks still makes a lot of sense," he said.

Looking forward, Pfeil sees more upside for European shares than U.S. stocks, expecting a snap-back in stock valuation levels as the euro zone emerges from recession.

Source: Reuters

Sony's SunTzu strategy to reinvent its Company

According to an article published in the Wall Street Journal today
"The Sony chief  Kazuo Hirai said he spent much of his first 18 months as CEO playing what he calls “defense” — cutting costs and streamlining the organization. However, the electronics division is now switching to offense with a wave of new products that “push the envelope.
His comments come on the heels of Sony’s electronics business showing signs of improvement. In the latest quarter ended June, Sony's TV business turned a profit for the first time in three years and its mobile products arm also moved into the black on the back of strong smartphone sales.

While Sony has scaled back the volume of its TV business, it has brought down its fixed costs considerably by unwinding liquid crystal display production joint ventures with Sharp Corp. and Samsung Electronics Co. to buy cheaper panels on the open market. Mr. Hirai said lower costs and a more efficient organization is important, but “that’s not going to move the bar” like a successful new product. He said Sony’s RX1 digital camera, a compact model with a giant, full-frame image sensor that sells for an eye-popping Y250,000 ($2525), is a good example of this approach. Sony said the reception from camera enthusiasts has been overwhelming and it can’t keep the camera in stores".

U.S. Existing-home sales rose 1.7% in August

Existing-home sales rose 1.7% in August to a seasonally adjusted annual rate of 5.48 million, the highest level in more than six years, as buyers rushed to lock in mortgage rates before they increased any further, the National Association of Realtorsreported Thursday.
The National Association of Realtors (NAR), which compiles the existing homes report, used the word "panic" in the July report and is warning that the gain in August may have also been skewed higher by nervous buyers and may also prove to be the "last hurrah" as higher mortgage rates, even with yesterday's Fed decision to maintain stimulus, are an immediate threat to the home sales market.

Another factor besides higher rates that is holding down sales is lack of homes on the market, at 4.9 months at the current sales rate vs 5.0 and 5.1 months in the prior two months. But a rise in prices is no longer a factor holding down sales, at least based on data in this report which show very slight downticks with the median price at $212,100.

The increase in mortgage rates has been holding back housing and is especially hitting first-time buyers which the NAR is warning are being "shut out" of the market. The NAR, citing data on the number of lockboxes, is also warning that traffic may be down. The next big report on housing will be next week on Wednesday with new home sales which have been disappointing in recent months.

Source: marketwatch,schwab

Weak Bank Lending one Big reason it is not time to Taper

"The U.S. Federal Reserve decided to hold off on scaling back its bond-buying program on Wednesday, and at least one reason for its choice may have been a stubbornly weak economic indicator: bank lending.

Since the bottom of the recession just over four years ago, commercial bank loans and leases have grown 4.0 percent, one of the weakest post-recession recoveries in terms of borrowing since the 1960s, according to Paul Kasriel, the former chief economist of Northern Trust Company. For comparison, over the same period after the July 1990-March 1991 recession, loans and leases grew over four times faster.

"Given what's happening to bank credit and given that the economy isn't booming, I would say it was very wise that the Fed did not choose to cut back on its asset purchases at this point," Kasriel said in an interview.

In recent weeks, residential mortgage lending has dropped and commercial lending growth has slowed as Fed officials have talked about starting to wind down their bond buying stimulus program. That talk of "tapering" spooked bond markets, lifting long-term borrowing costs.

The Fed noted in its statement that mortgage rates have risen, and added that "the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."

Source reuters

Precious Metals Prices 8.27 a.m. Eastern Time

Gold Price Futures     3 months    US$  1,365.12

Silver Price Futures    3  months   US$      23.16

U.S. jobless claims rise

The number of Americans filing new claims for jobless benefits rose last week, but it was difficult to get a clear read on the labor market's health because two states appeared to be working through a backlog of unprocessed claims.

Initial claims for state unemployment benefits increased 15,000 to a seasonally adjusted 309,000, the Labor Department said on Thursday.

Claims data have been thrown into disarray since an update to government computer systems in California, the nation's most populous state, and Nevada created a backlog in the processing of new claims two weeks ago.

That initially led to a sharp decline in new processed claims earlier this month, and a Labor Department analyst said the two states still appeared to be working through the backlog, which he said could take another week or two.

If taken at face value, the data hinted at a pickup in hiring during September that might make the Federal Reserve more comfortable about a plan to begin winding down a bond-buying economic stimulus program.

At the same time, policymakers have recently appeared more demanding about how much better the outlook for hiring must be before they trim monthly bond purchases.

Source: Reuters

LOWER THAN EXPECTED RETAIL SALES UPSET STERLING POUND

Retail sales data out of the UK has rained on the parade enjoyed by the sterling pound up to that point.

Lower than expected retail sales for the month of August marks a digression from the wave of positive economic data that led the Bank of England (BoE) to take on an optimistic tone in the meeting minutes released on Wednesday.

Retail sales volumes fell 0.9% on the month, disappointing economists who had expected a rise of 0.4%, and down from a 1.1% gain in July. Meanwhile, the annual rate of growth slowed to 2.1% from 3.0%. The previous month's figure was reported to be boosted by hot weather. 

LiveCharts

EUR/USD BREACHES 1.3500

The markets have reacted, as expected, with a strong USD sell-off to the surprising news that the Federal Reserve decided not to ease its stimulus this month. It was already 'priced in' the FX market that the Fed would start tapering by 10bn dollars, although only a few analysts, like Kathy Lien, managing director at BK Asset Management [or Craig Erlam from Alpari UK and Steen Jakobsen at Saxo Bank] had considered that it may start in December, if then. "If the Fed chooses to do so, we expect the dollar to sell-off quickly and aggressively," said Lien.

The EUR/USD reacted higher, breaking the key resistance of 1.34 and rapidly climbing to levels close to 1.3488, right after the announcement.

The excessively dovish tone in Ben Bernake's speech has also boosted the pair, which jumped above 1.3500, reaching a multi-weeks high at 1.3512.

LiveCharts

Central Banks introduce non-monetary measures to prevent house price bubble

Five years after a financial crash that had its roots in a housing bubble, global policymakers are rapidly increasing the use of targeted lending curbs to head off destabilizing property market booms and busts.

Authorities have introduced a range of non-monetary measures in the past year to dampen house price inflation and credit growth so borrowers and lenders alike are shielded somewhat when interest rates rise from historically low levels.

From Singapore to Sweden, from New Zealand to Switzerland, precautionary policy activism is gathering momentum.

 Policymakers are likely to use ‘macroprudential measures', these aim to reduce the vulnerability of the financial system as a whole rather than its component parts.

To skim the froth off property prices, measures to reduce the supply of credit or make it more expensive include limiting the size of a loan relative to the value of the property and capping the share of a borrower's income going to service debt.

Other steps are putting a floor under the risk weights applied to property loans, increasing provisions on housing loans and limiting banks' exposure to the housing sector.

The evidence is that loan-to-value (LTV) and debt-to-income (DTI) caps in particular are hitting the mark.

"These measures have been found successful in containing exuberant mortgage loan growth, speculative real estate transactions, and house price accelerations during the upswing," a new International Monetary Fund working paper concludes.

Ultra-low global interest rates have given some open economies little choice but to resort to macroprudential measures. Raising borrowing costs to douse property markets would have sucked in even more speculative capital and pushed up their exchange rates.

Singapore in June lowered its DTI mortgage cap to 60 percent. Concerned about rising household debt, the central bank estimated the proportion of vulnerable borrowers could rise to 10-15 percent if mortgage rates - well below 2 percent a year - were to rise by 3 percentage points.

With house prices at record highs, New Zealand is tightening LTV ratios rather than raising interest rates. From October, no more than 10 percent of new home loans can go to mortgages that exceed 80 percent of a property's value.

In February, Switzerland went much further when it became the first country to activate a counter-cyclical capital buffer for banks' domestic mortgages, requiring them to set aside an extra 1 percentage point of capital for home loans.

Source: Reuters

Precious Metals Prices 10.22 p.m. Eastern Time

Gold Price Futures   3 months    US$   1,360.54

Silver Price Futures  3 months    US$       23.03

U.S.-backed Free Syrian Army fight a three-front war, Assad forces,Hezbollah and international jihadists

According to an article published today in the Wall Street Journal,Western backed rebel opposittion forces, fighting Assad's regime are facing a three front war:

"An al Qaeda spinoff operating near Aleppo, Syria's largest city, last week began a new battle campaign it dubbed "Expunging Filth."

The target wasn't their avowed enemy, the Syrian government. Instead, it was their nominal ally, the U.S.-backed Free Syrian Army.

Across northern and eastern Syria, units of the jihadist group known as ISIS are seizing territory—on the battlefield and behind the front lines—from Western-backed rebels.

Some FSA fighters now consider the extremists to be as big a threat to their survival as the forces of President Bashar al-Assad.                                                                             "It's a three-front war," a U.S. official said of the FSA rebels' fight: They face the Assad regime, forces from its Lebanese ally Hezbollah, and now the multinational jihadist ranks of ISIS.

Brigade leaders of the FSA say that ISIS, an Iraqi al Qaeda outfit whose formal name is the Islamic State of Iraq and al-Sham, has dragged them into a battle they are ill-equipped to fight.

In recent months, ISIS has become a magnet for foreign jihadists who view the war in Syria not primarily as a means to overthrow the Assad regime but rather as a historic battleground for a larger Sunni holy war. According to centuries-old Islamic prophecy they espouse, they must establish an Islamic state in Syria as a step to achieving a global one".

China exploring ways to ease overcapacity

China has this week ordered 58 companies, ranging from steel, coke and cement producers, to cut excess production capacity by the end of the year, in the latest attempt to ease overcapacity in bloated sectors.

This is the third batch of enterprises required by the Ministry of Industry and Information Technology to cut overcapacity by the end of 2013, following more than 1,400 companies in July and another 67 earlier this month.

The orders came as China struggles to digest production gluts from an investment boom and generous subsidies in the past few years that saw producers in "favored" sectors expand rapidly with little regard to real market demand.

The average utilization rate in oversupplied sectors such as steel is below 75 percent, far lower than the international average, and around 22 percent of production capacity in China's major industrial companies sat idle in the first half of the year.

According to Zheng Xinli, executive deputy director of China Center for International Economic Exchanges, the government is looking to boost domestic demand, encourage producers to go global, push mergers and acquisitions, as well as setting higher environment threshold to reduce overcapacity.

"The administrative orders are short-term cures, the key to a balanced economy is to allow the market play a larger role," urged Gary Liu, executive director of CEIBS Lujiazui Institute of International Finance in Shanghai.

Source: Xinhua

China: Air defense sirens sounded on Wednesday morning across China to observe the 82nd anniversary of the Japanese invasion.

Air defense sirens sounded on Wednesday morning across China to observe the 82nd anniversary of the Japanese invasion.

Sirens began sounding at 9:18 a.m. and lasted for three minutes in Shenyang, capital of northeast China's Liaoning Province, where the Japanese army began its assault.

Meanwhile, cars on nine roads, 18 streets and other areas in the city stopped and drivers blew their horns.

It was the 18th time sirens and horns sounded in the city to remind people of the national humiliation, a routine that began in 1995.

People also gathered in front of the "9.18 Historical Museum" to attend a ceremony in which a bell was struck to warn people not to forget the past and be vigilant in times of peace.

"I will remember today and the September 18 incident for the rest of my life," said Sun Xiu, a university student who observed the ceremony.

"We commemorate the war anniversary in pursuit of peace," said Wang Jianxue, deputy head of China Association of Historians Studying Modern Chinese Historical Materials.

Similar commemorations were staged in other cities across China. Sirens sounded in 13 other cities in Liaoning. In the east China city of Hefei, an air defense drill was organized among local residents after the siren.

On Sept. 18, 1931, Japanese troops blew up a section of the railway under its control near Shenyang, then accused Chinese troops of sabotage as a pretext for attack. They bombarded barracks near Shenyang the same evening, beginning a large-scale armed invasion of northeast China.

The incident was followed by Japan's full-scale invasion of China and the rest of Asia, triggering a 14-year war of resistance against Japanese aggression.

China's volunteers announced on the special day that they will offer 1,500 medals to veterans who fought the Japanese invaders as a sign of their respect for the veterans.

Source: Xinhua

Japan plans to provide 10,000 yen to low-income earners

The Japanese government plans to provide 10,000 yen in cash benefits per person to low-income earners to help ease the impact of the planned consumption tax increase in April 2014, informed sources said.

The one-time payments, set to cover members of families that are exempted from local residential tax, are estimated to cost the government some 240 billion yen, the sources said. The government plans to finance the program under a supplementary budget for fiscal 2013 ending in March.Prime Minister Shinzo Abe is set to make his final decision early next month on whether to raise the 5 pct consumption tax to 8 pct in April 2014 as planned.

Vacant Japan homes show holes in Abe's push for housing growth

Broken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment.

More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour's train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn't stopped developers from building at least eight new apartment blocks in the same city in the past two years. Prime Minister Shinzo Abe's plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan's demographics. Rural, suburban and less-desirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world's fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties. "Even when the number of vacant homes is on the rise, more and more new homes are being built," said Hidetaka Yoneyama, a senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan's housing market. "That's absurd." Home vacancy in Japan, estimated at about 18 percent of housing nationwide, may reach 24 percent by 2028, he said.

NewsOnJapan

Sharp to raise Y166 bil. from share sales

Sharp Corp., a supplier of screens to Apple Inc., will raise as much as ¥166.4 billion in share sales in an effort to rebuild its balance sheet after record annual losses.

Japan's largest maker of liquid-crystal displays will sell as much as ¥149 billion of shares to the public, the Osaka-based company said in a statement Wednesday. The company also will make allotments to Makita Corp., Denso Corp. and Lixil Group Corp., with proceeds to be used for capital expenditure, it said.Intensified competition in LCDs and flat-panel TVs drove Sharp to losses totaling ¥921 billion during the past two financial years.

NewsOnJapan

Property investors in Hong Kong and Singapore look to Japan for higher returns

Property investors in Hong Kong and Singapore are targeting new high-yielding real estate markets against a backdrop of uncertainty over the global economic environment and weakening economic conditions across the region.

Driven offshore as a result of curbs placed on their home markets, Hong Kong and Singapore investors have turned to offshore markets, especially Japan, according to Mark Lampard, managing director of corporate solutions, Asia Pacific, at property consultancy Colliers International.

Hong Kong investments in Tokyo property so far this year total US$1.1 billion, according to data from commercial property information service provider Real Capital Analytics. That ranked Japan the third most popular destination for local investors after traditional favourites Shanghai and London.

The Asia Pacific region is entering an era of slower growth and faces challenges such as the potential risk of liquidity outflow from Asia, says Colliers International.

"Hong Kong investors turned active in seeking external investment opportunities across the border since early last year," said Simon Lo, executive director of Colliers' research and advisory department for Asia. Their targets included both mainland and Japan properties offering higher rental yields.

"Investors have turned defensive and are concerned to secure rental returns in the coming two to three years. They are not expecting significant capital gains in a short period of time," Lo said.

In a separate study by Savills, Tokyo was named as the favourite world city, ahead of New York, for investors seeking returns above treasury yields from residential investments.

Source: South China Morning Post

Russia signals opposition to tough resolution on Syria

Speaking in Damascus after meeting Syrian President Bashar al-Assad, Ryabkov also kept up Russian criticism of a report by U.N. investigators on a poison gas attack in the suburbs of Damascus on August 21.

Western governments say the U.N. report confirmed Assad's forces were behind the attack, which led the United States to threaten punitive military strikes before Washington and Moscow reached a deal for Syria to abandon its chemical arms.

Russia says it suspects rebels staged the attack to provoke military intervention, and Ryabkov accused the investigators of all but ignoring evidence presented by the Syrian government that he said supported rebel culpability.

"We are disappointed that there is no due attention paid to this evidence in the report which the (U.N.) group presented in New York earlier this week," he told reporters in Damascus in televised remarks.

"One cannot be as one-sided and as flawed as we have seen, laying the full (blame for the) incident in Ghouta upon the Syrian government," he said, referring to Western nations' interpretation of the report on the August 21 attack.

He said the report was limited in scope and reiterated Russian calls for further investigation that would include accounts from sources such as the Internet and government evidence of alleged chemical arms use in the days after August 21.

Source: Reuters

Asian shares rise, yields and dollar fall as Fed stuns

Asian shares and currencies rallied broadly on Thursday after the Federal Reserve stunned markets and decided not to taper its asset-buying program, sending U.S. bond yields and the dollar into a tailspin.

With U.S. stocks at a fresh record high, MSCI's broadest index of Asia-Pacific shares outside Japan jumped 0.9 percent to its highest in almost four months.

Australia's main index gained 1.1 percent .AXJO to a five-year high and Japan's Nikkei managed to brush aside a rise in the yen to climb 0.8 percent to a two-month peak.

The prospect that U.S. rates could stay low for longer was further underlined by news from the White House that noted-dove Janet Yellen was the front-runner to take over the Fed when Ben Bernanke steps down.

U.S. stocks rallied to record highs on Wednesday after the Federal Reserve decided to continue with its bond buying program

U.S. stocks rallied to record highs on Wednesday after the Federal Reserve, in a surprise to markets, decided against scaling back a stimulus program that has helped fuel Wall Street's rally of more than 20 percent this year.
While equities jumped on the Fed's decision, questions remained how long the rally would last as the central bank expressed concerns about the economy's future growth with likely budget and debt limit battles in Washington to come.
"From a short-term stock market perspective it can be seen as a good thing because the market likes to see continued Fed stimulus. From a real economy standpoint, what it says is the Fed is actually more nervous about the economy than is generally perceived."
The Dow Jones industrial average  rose 147.21 points or 0.95 percent, to 15,676.94, the S&P 500  gained 20.76 points or 1.22 percent, to 1,725.52 and the Nasdaq Composite .added 37.942 points or 1.01 percent, to 3,783.641.
About 580 stocks on the NYSE and Nasdaq hit new 52-week highs on Wednesday. About 325 of them hit their highs after the Fed announcement.

Source: Reuters