Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Dow closed up 322 points or 3% and the wider S&P 500 index of US stocks closed up 3.4% as markets strengthened their view that US Federal Reserve Chairman Ben Bernanke will announce a third round of Quantitative Easing on Friday.
Ironically, this bounce-back rally in US stocks followed weaker than expected US economic data. This reinforced hopes Bernanke will be forced into more drastic action to boost stock markets. See more here at Bloomberg
Bernanke meets with his Federal Reserve colleagues and other central bankers at the Jackson Hole mountain resort in Wyoming on Friday and is expected to deliver a speech outlining the Fed's response to the latest slowdown in the US economy.
After a similar slowdown before last year's annual Jackson Hole shindig, Bernanke announced a second round of Quantitative Easing (QE II) or money printing to buy US government bonds. Stock markets rallied 28% in the six months after the QE II speech at Jackson Hole.
Many are describing Bernanke's approach to trying to boost stock prices as a continuation of the Allan Greenspan approach, often described as the Greenspan Put. The idea is to make Americans feel wealthier so they spend more in the shops and companies invest more. One member of the Fed's policy making committee who apposes this approach even described it as the 'Bernanke Put'. However, some say it simply makes the very rich wealthier, who don't spend as much, leading to yet more hoarding in US Treasuries.
The rally on US stock markets followed weaker than expected US economic data. US new home sales fell more than forecast in July to a 5 month low. See more here at Bloomberg.
Also, The Fed's Richmond Index of factory output in the mid-Atlantic region fell to minus 10, its worst level since June 2009. See more here at Reuters.
This talk of QE III helped investors feel better about riskier assets and also weakened the US dollar vs various currencies because money printing devalues currencies. The New Zealand rose to 83.5 USc overnight from under 83 USc and as low as 81.6 US on Monday.
The gold price also fell sharply from its record high set yesterday of US$1,917/oz. It was as low as US$1.861/oz overnight as investors seemed less keen on such safe haven investments. See more here at Bloomberg.
US Treasury prices also fell, meaning yields rose slightly. The yield for the US 10 year Treasury, which is also seen as a safe haven, rose to 2.14%. It has been below 2% in recent days. See more here at Blooomberg.
No chart with that title exists.
6 Comments
If he prints again inflation will take off...if he doesn't promise to print the DOW will be toasted...and all the other markets will follow....let's see...QE1 failed...QE2 failed....what will he do?...why print again of course.
Hold those lambs and beef back boys...she's all on again...it'll be $500 a lamb before too long and $20 a litre for diesel...
And JK can sing his commodities song again....anyone wanna buy some US treasury IOUs...bung em on the nail in the long drop along with the greenbacks already there.
I know Olly likes his assets good and hard, so too the Gremlin himself:
"Greenspan also said that he did not think gold, which reached a record above $1,900 an ounce this week, was in a bubble.
“Gold, unlike all other commodities, is a currency,” he said. “And the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.”
10-Year Treasury yields are testing support at 2.00 percent — a 50-year low. One thing is clear: Fed monetary policy has failed. Suppressing short-term interest rates has, in most cases, lifted the economy out of recession, but also setting things up for an even bigger crash the next time round — requiring even more severe interest rate cuts. Long-term yields have been falling for 30 years.
We are now clipping the tree tops, Biggles — with short-term rates near zero and no gas in the tank to lift us over the next obstacle. A bond market revolt cannot be far off.
Came across this speech given by Peter Dunne.
http://www.unitedfuture.org.nz/address-to-the-unitedfuture-2011-conference/
Apparently there is legislation before parliament regarding income sharing/splitting but only for those couples with children.
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