Global markets go down, up, then down again in quest for answers (+ analysis); US Fed looks to offer assurances and break panic; Cameron says police in "fightback" after more English violence; Koreas exchange fire; Syria rejects Turkey's peace overture; and more

Top of the Agenda: Global Market Rebound on Fed Statement, then slump again

Following a statement by the US Federal Reserve that said it planned to keep interest rates near zero for the next two years, investors sent Wall Street's Dow Jones Industrial Average up by 4 percent (WSJ) at the end of trading yesterday. The Fed also said it was considering a "range of policy tools" to combat a stagnating US economy, which some investors interpreted as further quantitative easing.

The Fed's move indicates that it sees limited US growth through 2013, but nonetheless hopes to assuage investors (NYT) and foster risk-taking by keeping borrowing costs down.

Asian and European markets responded positively (FT) to the announcement in Wednesday trading, even as long-term investor sentiment remained cautious amid the ongoing US and European debt crises.

However, as markets have turned their attention to Europe and its debt concerns, they again retreated sharply.

US stock index futures dropped (Reuters), pointing to a lower opening on Wall Street.

Analysis

While the Fed's statement may have broken the market panic, it was not enough to restore confidence in continued growth, says the Economist.

With markets rattled by the downgrade of US debt, some experts fear running out of policy tools to prevent another global recession, while others are calling on government and central banks to improve fiscal and monetary policy coordination, says this CFR Analysis Brief.

Global markets' reaction to eurozone turbulence and the S&P downgrade of US debt add uncertainty to US foreign policy, raising questions about which goals the country has the means to pursue, says CFR's James M. Lindsay.

 

PACIFIC RIM

Koreas Exchange Fire

North Korea fired artillery in the direction of the South Korean island of Yeonpyeong, and the south responded with three shots (Yonhap) in the direction of the western sea border.

CHINA: The country's first aircraft carrier, a rebuilt Soviet-era ship, embarked on a sea trial (BBC) in the northeast Dalian port in Liaoning province, underscoring growing regional worries in the South China Sea over China's naval build-up.

 

ELSEWHERE:

Cameron promises "fightback" after 4th night of violence

Turkey fails to budge Assad as Syrian crackdown rolls on

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.