Calm prevails after Fed's taper move Thursday 16.15 GMT. US stocks are giving back some of the previous session's strong gains but the underlying mood among investors remains broadly positive in the wake of the Federal Reserve's decision to begin withdrawing its economic stimulus measures, while strengthening its forward policy guidance. The dollar is adding to its recent advance, with investors concluding that the $10bn tapering of the Fed's $85bn a month of quantitative easing shows the world's biggest economy is accelerating and less in need of the central bank's largesse. This more optimistic assessment can be seen in US two-year bond yields creeping up 3 basis points to 0.36 per cent, still very low by historic standards, while the prospect of less Fed intervention sees 10-year paper rising 5bp to 2.94 per cent, just several basis points shy of 29-month highs. It is likely that the mostly cheerful market mood reflects relief that the nagging uncertainty about when the Fed will finally pull the taper trigger is over and investors can concentrate on traditional seasonal bullishness. "At long last the Fed announced a much-anticipated refocusing of policy away from balance sheet easing and back towards conventional short-term rates targeting," said Lena Komileva, chief economist at G+ Economics. "As expected, the Fed's "lower for longer" rates promise is firmly embedded in its QE exit strategy . . . this has provided the main catalyst for the market reaction to the Fed's statement, triggering a sharp drop in financial volatilities and a relief risk rally." The easing tension was highlighted by the CBOE Vix index, often referred to as Wall Street's "fear gauge," falling 15 per cent to 13.8 on Wednesday in response to the S&P 500 bouncing 1.7 per cent to a fresh record close of 1,811. On Thursday, the Vix is down another 6 per cent even as the S&P 500 slips 5 points in late morning trade in New York, as some profit taking is exacerbated by news that Facebook and its founder Mark Zuckerberg are to sell about $3.9bn worth of shares in the social network company. The new Wall Street dip has not damped the spirit in Europe though, and the FTSE Eurofirst 300 is up 1.6 per cent as analysts welcome the reduction in policy uncertainty. "The bad news seems largely behind us now that gentle tapering is the baseline, fiscal issues are papered over for a year or two, and geopolitics are simmering rather than boiling," said Steven Englander, global head of G10 FX Strategy at CitiFX. With short rates pinned at zero in the G3 and long rates not going anywhere in the eurozone and Japan, there are a lot of attractive carry options underwritten by the commitment to essentially zero rates. A favoured funding currency for carry trades is the yen, and its slide to a fresh five-year low versus the US dollar has given a boost to the exporter-sensitive Tokyo stock market. The Nikkei 225 jumped 1.7 per cent after the dollar, early on Thursday, hit Y104.35 - its highest relative to the yen since October 2008. The dollar is currently changing hands at Y104.17, and is modestly higher versus the euro and sterling. The Fed taper has not gone down so well in some quarters, however. Gold is sliding $23 to a near-six month low of $1,194 an ounce, and worries that less central bank liquidity will make it difficult for emerging markets with large current account deficits to attract funds has hurt selected currencies. The Indonesian rupiah lost 0.4 per cent to Rp12,195 against the dollar, earlier touching a five-year low, while the Indian rupee is off 0.2 per cent. Still, in general, many emerging markets have reacted relatively calmly to the Fed's move. Meanwhile, the Shanghai Composite fell for an eighth consecutive day, losing 1 per cent, as China's investors fretted about the country's own monetary issues. Financial stocks were weak after the central bank chose not to provide additional liquidity despite one-year interest rate swaps, which are based on the 7-day repo rate, at one point hitting 5 per cent, a record high according to Reuters. Later in the day the People's Bank of China said it had made an emergency injection as it sought to calm those nerves. In Sydney, the S&P/ASX 200 bounced 2 per cent after the Australian dollar touched a three-year low of US$0.8820 overnight. Australian equities were further boosted by rises in resources stocks following Wednesday's gain in oil prices. Brent crude added 1.1 per cent to $109.63 a barrel, and it is moving ahead again, up 69 cents to $110.29.