The Before 24… Global Market News for your next twenty-four…..
The View: Investors and markets become giddy at the idea QE3 may still be on the table for the US.
Spurred by Bernake’s comments most Asian markets followed both the European and US markets, climbing in their Tuesday morning trading. The Nikkei climbed 2.4% and the Hang Seng also added 1.8%. China’s Shanghai was the only market closing lower after government data showed the nation’s largest industrial groups were down 5.2% from last year.
European shares edged higher Monday. The rally was led by improved German business sentiment. The Ifo Buisness-climate index, a good bellweather of the Germany economy, rose to 109.8 for a fifth straight month. Also leading the rally comments made by Fed President Bernanke in a speech Monday saying future improvement in the labor market is dependent on further economic growth. The markets took this language as indication the Fed would start another round of quantitive easing.
US markets all closed in the green Tuesday on remarks from the Fed president. The Dow gained 160.90 points, the S&P added 19.40 poinsts, and the Nasdaq grew 54.65 points. The US market’s choose to ignore the weaker new home sales number instead keenly listening to Bernanke’s speech. Some analyst question what was and wasn’t said about QE3. Bernanke did mention and maintained his position on low-interest rates. He also stated the US needed more growth to bring down the unemployment rate and implied the US wasn’t quite there yet. He didn’t however say in explicit language QE3 was definitely coming down the pipeline. Investors and the markets seemed to have taken the language about growth being needed to help lower the unemployment rate as a que that QE3 could and would be used to stimulate the economy into growth mode. As with most things interpretation lies in the ear of the beholder and we will have to wait and see which camp is correct.
Commodities were mixed on Monday. Oil gained $0.17 and the WTI was up $0.21. Gold added $29.6o to close at $1692.00. In the food comodities Wheat and Soybeans lead an agricultural commodity rally. Soybeans were up as more ,asset managers are starting to increasing the buy soybean futures contracts (the contract that states the amount someone would buy soybeans at a specific time in the future) on continued fears Brazil’s crop will be smaller than expected. Wheat rallied on the same type of fear. This time it is fear that Europe’s crop will shrink due to a lack of rain in the region.
The 10 year closed at 2.25%. While the dollar lost some of its power on expectations the Fed will print more money with it starts up QE3 again.