The Federal Reserve Helps Again

Published by Filipe R. Costa on Thu, 23/08/2012 - 12:05
more quantitative easing

Daily Market Commentary for August 23: Equities started the day in ugly terms and European markets closed down but the FED Minutes released at 19.00 UK time, helped on an inversion for US markets. Dovish comments from FOMC are giving some enthusiasm to investors.

Many US newspapers have been stating that the European Union can’t solve its crisis and that leaders are just re-stating the same without giving a solution to the problem. We can say the same about the FED. They have been stating the economy may need additional help and that they (the FED) are ready for further intervention, just to keep alive the idea of QE3 occurring but truth is, it hasn’t happened until now and will be difficult to implement under the current environment with inflated equity prices. Nevertheless it seems that words are better than action for both the EU and the FED because every time a clue is given, investors react very well, so why waste bullets if we can keep the threat without them?

GDP in Germany grew 0.3% in second quarter, in line with expectations. The growth is not what we would call spectacular but, under the current conditions, it is really positive, especially if we look at imports and exports that came at decent paces. Investment is the item that came more depressed.

PMI data pointed to better than expected manufacturing numbers across Europe this morning. The numbers show contraction but less pronounced than expected. In China, HSBC manufacturing PMI for the current month showed another contraction and that’s worrying investors since China has not announced intervention so far and investors fear the worst is still to come.

For now enthusiasm in the US continues but not something to jump aboard without looking. Investors need to be careful as economic data is pointing to the wrong side.

Name Last price Close Price % 5-Day % YTD %
GBP/USD - US $ per £ 22/08/2012 1.5884 0.67 1.31 2.28
Crude oil (Light Sweet) Composite 22/08/2012 97.35 0.57 3.25 -1.67
Silver (LBM) $ 22/08/2012 29.49 0.51 5.62 5.47
EUR/USD - US$ per Euro 22/08/2012 1.2534 0.45 1.99 -3.24
Nasdaq 100 Index 22/08/2012 2783.42 0.4 1.75 22.2
Gold (LBM) $ 22/08/2012 1641.1 0.1 2.36 4.74
S&P 500 22/08/2012 1413.49 0.02 0.57 12.4
EUR/GBP - £ per Euro 22/08/2012 0.7892 -0.2 0.69 -5.28
Dow Jones Industrial Average 22/08/2012 13172.8 -0.23 0.06 7.82
Nikkei 225 22/08/2012 9131.75 -0.28 2.32 8
USD/JPY - JPY per US$ 22/08/2012 78.55 -0.88 -0.59 2.16
DAX (Xetra) 22/08/2012 7017.75 -1.01 1.02 18.98
FTSE MIB 22/08/2012 15161.25 -1.1 3.44 0.47
FTSE 100 22/08/2012 5774.2 -1.42 -1.01 3.62
CAC 40 22/08/2012 3461.65 -1.47 0.36 9.55
IBEX 35 22/08/2012 7340.7 -2.7 2.97 -14.31