The Fed statement was a non-event for the markets, even though the Fed modestly upgraded some of its economic commentary (economic growth "strengthened somewhat" in the third quarter; the previous statement said economic growth "remains slow") and it was interesting that Charles Evans dissented, arguing for a more aggressive stance on easing.
Back to Europe: The German DAXX ended the day up over 2 percent on hopes that the G20 would find some way to put a positive spin on the meeting tomorrow. Sarkozy and Merkel will be straining to put a positive spin on the outcome of the Papandreou meeting:
1. "I want to wring his neck, but I'll put my arm around him instead." Big pressure now to announce a speeded-up timetable for the Greek referendum, likely early December, not January, providing Papandreou survives the confidence vote.
2. The Papandreou earthquake: the VIX volatility index is likely to stay elevated. Now, anything is possible, and that means higher implied volatility, and that means a higher VIX. Notice that even though stocks are strong today, the VIX — after going from 24 to 37 in two days, to close at 34.77 yesterday — is down only a point today, to 33 and change. You can thank Papandreou for that.
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