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Equities Gain as Volatility is Seen at Monthly Lows; Markets Look to Fed Statements Suggesting Additional QE Stimulus
Markets have started to stabilize and see reductions in volatility as US stocks managed to show a positive close Asian equity markets have followed suit. For the most part, no news has been good news as we have seen no major surprises in macro data and a much more subdued tone in the financial headlines. Economic indicators will be released in the Eurozone today, so growth prospects will be the guiding factor in trading during the session. EU macro data has held up relatively well despite the recent market turmoil so new assessments will look to determine whether or not there is any change to that trend. Currency values remain a concern for both the Japanese and Swiss central banks because investors have shrugged-off money market actions and continuous intervention warnings, driving the Yen and Franc to all time highs. The central bank actions have had limited effect and it is starting to look as though there is very little these central bankâ€™s can do to (unilaterally) reverse the recent trends. Macro data today will come in the form of German and Eurozone PMI numbers, while in the US, we will see the new home sales report. The St. Louis Federal Reserve chairman (Bullard) released a statement saying that the FOMC will be forced to act if growth pressures persist and deflation starts to be seen in consumer prices. This is essentially a signal of future quantitative easing, so all the attention will now turn to Ben Bernankeâ€™s Jackson Hole speech on Friday to see if he echoes a similar opinion. In Australia, the Deputy Governor of the RBA (Battellino) said that growth rates in Australia are slowing more than previously expected and that this will present challenges for policy makers for the remainder of the year. Overnight macro data from China was seen with the a flash PMI (private sector report), which showed that manufacturing activity is showing contraction, which is Aussie negative as China is a large importer of Australian metals (copper, in particular). Declines in Chinese manufacturing point to a decrease in demand for Australian export companies. Markets are generally divided in interest rate forecasts as the recent market turmoil has led many analysts to scale back rate hike expectations for the rest of 2012.
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Markets have started to stabilize and see reductions in volatility as US stocks managed to show a positive close Asian equity markets have f...