In no uncertain terms, the FOMC minutes deflated the markets’ Federal Reserve air balloon as they unequivocally temper September.

Without the Fed’s air balloon floating markets today, stocks are temporarily succumbing to forces of gravity.

With interest rates likely staying low for the next 2-3 years, it is unlikely US stocks will have to deal with a particularly deep or intense air pocket as the wall of money argument seems always to win out.

US equities were weaker overnight with the S&P stepping back from its record close on Tuesday.

Stocks had been bubbly and trading stronger for most of the session but turned lower after the Fed minutes tempered expectations for more near-term monetary easing.

The July FOMC meeting minutes released overnight revealed a Committee aiming to wrap up the policy review in the “near future.”

Still, they did not see an urgent need to provide additional accommodation imminently.

BAML fund managers survey

Nothing speaks more ironic than on the day that the latest BAML fund manager survey showed that investors were worried about overvalued markets, the S&P 500 managed to make a new record high. Maybe that proves their point. That does suggest that the pain trade for a lot of investors is a continuation of the equity market rally that a lot have missed out.

Details from the survey support that view and BAML think that positioning is not “dangerously bullish.” They pointed to cash balances, which stand at around 4.6%, still above the 4% level considered to signal the emergence of “greed.”

Currency Markets: The Euro

Like other cross-assets, currency markets succumbed to the FOMC temper in September as the EURUSD fell over 100 pips post minutes.

However, since we are still within the current well worn EURUSD ranges, market participants will be looking for clues at 1.1825 support level, which was a strong buy point of late, and below there, the critical level is 1.1750 before the 1.1700 pivots.

The ringgit

The Malaysian ringgit should weaken off a touch today in line with general US dollar strength as the FOMC minutes under-delivered on the currency market’s dovish expectations. Still, the ringgit will find support from stabilising oil prices, and as foreign investors chase for yields with MGS in real terms, offer up very generous returns these days.

Gold markets

There is not a great deal to say about the gold slide; the Fed completely underdelivered on gold market expectations while the stronger dollar merely rubbed salt in the wound.

But the real sting came after the FOMC minutes were released and showed that meeting participants were somewhat sceptical about yield curve control.

It is going to be another day of picking up the pieces where a lot of new gold entrants face the harsh reality that gold trading isn’t a one-way street despite what those who wear the gold shaded tin foil hats will tell you.

But it’s not as if the golden phoenix can’t rise again in the absence of yield control curve. It just means gold will need some help for higher inflation break-evens or renewed US dollar pressure.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp