ETX Capital Daily Market Bite, 11th July, 2013; Bernanke Triggers Rally Across Global Markets
July 11, 2013 8:20 am
July 11th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Ben Bernanke, chairman of the Federal Reserve, sparked a sharp rally across stocks and bonds late Wednesday in the US after saying that monetary policy will remain highly accommodative for the foreseeable future. Asian markets responded in a relief rally overnight which saw the Hong Kong Hang Seng and South Korea’s Kospi index racking up gains over 2% each.
Asian markets incurred some of the heftiest losses since May 22, when Bernanke laid out his intentions to taper asset purchases, as the region has been one of the biggest beneficiaries of easy Fed cash over the years. European share markets are responding accordingly, jumping sharply higher on the back of strong overnight leads and comfort over continued central bank activism, not only from the Fed but the BOE and the ECB too.
Bernanke’s comments on Wednesday were unexpected and a sharp contrast to the taper talk of recent weeks which prompted a rout across global risk assets. Bernanke said that the current unemployment rate of 7.6% probably overstates the health of the labour market and the Fed is committed in pushing inflation back up to the 2% target. Bernanke’s remarks came a few hours after the release of the FOMC meeting minutes from the June policy meeting which showed that half of the board of Fed members want to halt QE by year end but many still want to see further improvement in the jobs market before unwinding or halting the programme.
Bernanke and his colleagues are trying to reassure the market by communicating that even once tapering of stimulus starts, the Fed’s monetary policy will remain accommodative with record low rates, despite the stretched balance sheet. It looks like that’s worked, at least for now, with risk assets posting strong gains across the board — in equities; the FTSE100 is up around 77 points and the Eurostoxx 50 adds 39. In the currency space, the euro and the yen both advance over a weaker US dollar which was knocked by Bernanke’s comments. Commodities also on the rise with gold up around $40 while oil prices remain elevated on the perceived threat of escalating tensions in Egypt.
July 11th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
Ben Bernanke, chairman of the Federal Reserve, sparked a sharp rally across stocks and bonds late Wednesday in the US after saying that monetary policy will remain highly accommodative for the foreseeable future. Asian markets responded in a relief rally overnight which saw the Hong Kong Hang Seng and South Korea’s Kospi index racking up gains over 2% each.
Asian markets incurred some of the heftiest losses since May 22, when Bernanke laid out his intentions to taper asset purchases, as the region has been one of the biggest beneficiaries of easy Fed cash over the years. European share markets are responding accordingly, jumping sharply higher on the back of strong overnight leads and comfort over continued central bank activism, not only from the Fed but the BOE and the ECB too.
Bernanke’s comments on Wednesday were unexpected and a sharp contrast to the taper talk of recent weeks which prompted a rout across global risk assets. Bernanke said that the current unemployment rate of 7.6% probably overstates the health of the labour market and the Fed is committed in pushing inflation back up to the 2% target. Bernanke’s remarks came a few hours after the release of the FOMC meeting minutes from the June policy meeting which showed that half of the board of Fed members want to halt QE by year end but many still want to see further improvement in the jobs market before unwinding or halting the programme.
Bernanke and his colleagues are trying to reassure the market by communicating that even once tapering of stimulus starts, the Fed’s monetary policy will remain accommodative with record low rates, despite the stretched balance sheet. It looks like that’s worked, at least for now, with risk assets posting strong gains across the board — in equities; the FTSE100 is up around 77 points and the Eurostoxx 50 adds 39. In the currency space, the euro and the yen both advance over a weaker US dollar which was knocked by Bernanke’s comments. Commodities also on the rise with gold up around $40 while oil prices remain elevated on the perceived threat of escalating tensions in Egypt.
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