It's 2:00:01 pm and the Fed has just announced it will hike rates by 25 bps while using very dovish language to convey that just like "tapering was not tightening" in 2013, so "tightening isn't really tightening", and unleashing a massive buying order.
So far so good. But the real question is what does this mean for post-kneejerk market dynamics, and the one most important variable of all: liquidity.
Trying to remember what the world was like the last time the Fed hiked rates on June 29, 2006? Take a stroll down memory lane with DB's Jim Reid, for a quick reminder.
Following the collapse in industrial production, it is no surprise that Markit's Manufacturing PMI has plunged to 51.3, its lowest since October 2012. Under the surface it is a disaster with production volume growth the softest since October 2013, and new orders crashed to worst since September 2009.
But do not ignore manufacturing because, as Markit notes,
It was just last Thursday when we previewed what we said would likely be further downgrades for Brazil on the heels of S&P's move to cut the country to junk in September.
Here's what we said:
Via Dana Lyons' Tumblr,
Despite yesterday’s rally in the major indices, the underlying breadth statistics were historically weak.