FED Acts, Europe Will Suffer

Published by Filipe R. Costa on Fri, 14/09/2012 - 10:05
qe3 dose

Daily Market Commentary for September 14: Yesterday the FED announced a new bond buying plan with unlimited funds and no end date. According to Ben Bernanke, the FED is willing to do whatever it takes to put the US economy on track again, spending as much as $40 billion per month and continuing its operation Twist. The Euro continues to rise and may have disastrous effects in peripheral eurozone economies.

The widely expected and anxiously waited QE3 is now on the table to save the US economy. The FED points the struggling job growth, the depressed housing market and a decrease in business investment as triggers for the action. Equity markets rose to new highs, with the S&P 500 gaining 1.63%, the FTSE edging to 5,819, gaining 0.65% and precious metals benefitting the most. At the time of writing, gold is trading at $1,771, up from $1,719 a value seen just prior to the FED announcement. The FTSE, having closed before the announcement, rose just 0.65% but it is now trading at 5,894, up 74 points from yesterday’s close.

If the news was received with enthusiasm all over the world, it certainly was not welcomed by some. The recent rise in the Euro is likely to continue due to US dollar debasement and will pose additional threats to peripheral countries that are trying to drive exports to compensate for a depressed internal demand. The Japanese economy is also in trouble as pressure from exporters continue and the central bank will likely intervene soon to fight the 8% rise since March. The last time there was intervention was in October 2011.

For now, equities are broadly bullish, the US dollar is bearish, and the yen deserves special attention from spread bettors for the explained above.

Name Last price Close Price % 5-Day % YTD %
Nasdaq 100 Index 13/09/2012 2831.35 1.42 0.06 24.3
DAX (Xetra) 13/09/2012 7310.32 -0.45 2 23.94
S&P 500 13/09/2012 1459.99 1.63 1.95 16.09
CAC 40 13/09/2012 3502.09 -1.18 -0.22 10.83
Dow Jones Industrial Average 13/09/2012 13539.9 1.55 1.87 10.82
Gold (LBM) $ 13/09/2012 173350 0.08 1.73 10.63
FTSE MIB 13/09/2012 16244.25 -1.07 2.94 7.65
Nikkei 225 13/09/2012 8995.25 0.39 3.63 6.39
FTSE 100 13/09/2012 5819.92 0.65 0.74 4.44
GBP/USD - US $ per £ 13/09/2012 1.6152 0.29 1.38 4.01
EUR/USD - US$ per Euro 13/09/2012 1.2993 0.7 2.87 0.3
Crude oil (Light Sweet) Composite 13/09/2012 9818 1.27 3.57 -0.83
EUR/GBP - £ per Euro 13/09/2012 0.8044 0.4 1.46 -3.46
IBEX 35 13/09/2012 7935.9 -0.7 0.94 -7.36