It has been a positive week so far for the Eurozone, firstly with the German constitutional court approving the ESM fund and also from across the Atlantic, the US Fed launching its QE3 Program. The above outcomes has for the first time eased pressure on the single currency. Eurozone ministers will be meeting today to discuss the situation in Spain as well as Italy, however the ECB cannot take any action unless Spain formally applies for a bailout rescue.
The Euro continued its strong rally, moving 0.38% higher against the USD, trading in the region of 1.30
Most of the equity markets in the region closed lower with the Xetra DAX closing 0.45% lower while the French CAC40 dropped 1.18% lower. The Dutch AEX closed 0.45% lower. The Euro Stoxx 50 added 1.8% during the early hours of today.
London FTSE100 Snapshot
The FTSE100 is tipped to open strong on Thursday morning after yesterday’s trading session saw the Index add 37.84 points to close 0.65% higher. BAE systems and EADS were the biggest losers for the day, with stocks for both dipping 7% as the assesment continues for the hurdles that need to be cleared. It is learnt that BAE systems could walk out of the deal unless it was allowed to operate without any any political interference.
In today’s news, Pub operator JD Wetherspoon will be announcing their fourth quarter report. The pre close update back in July saw the company report 6.1% sales growth boosted by the Queen’s jubilee and the Euro 2012. Besides JD Wetherspoon, Songbird Estates, MP Evans Group amongst others are expected to release their trading statements.
The GBPUSD was seen trading at 1.61911, hitting a 4 month high.
Market News – Asia
Asian markets carried the optimism from the US markets as the regional equity markets made significant gains. Clearly bouyed by the Federal Reserve’s announcement to launch QE3.
The Nikkei was up 1.72% while the Hang Seng gained 2.87%. The ASX 200 also rose by 1.19% while the Shanghai Composite Index saw modest gains of 0.85%. The MSCI Asia/Pacific benchmark index rallied to 4.5%.
Closer home, the currency markets are building up hopes for a possible intervention from the Bank of Japan to weaken the rising Yen in order to combat the aggressive move by the Fed to boost the US economy. However, the impact of the Japanese Central bank intervening into the currency markets could only have a short term impact, which has seen its export markets crumble on account of the strong Yen. Dow Jones Newswires noted that the BoJ had apparently “checked” the rate of the Yen during the US trading session and this is being seen as a precursor to an intervention.
The Yen was trading at 77.57 to a Dollar earlier today.
Meanwhile Standard and Poors improved the credit rating outlook for South Korea by one notch to A+, the first upgrade in the past seven years. Previously, Moody’s (Aa3) and Fitch Ratings (AA-) had improved the outlook for the region citing strong fiscal position, a robust economy along with reduced vulnerability of the nation’s banks.
Market News – US
The long awaited news that investors were eagerly waiting for finally came out as Ben Bernanke, upon the conclusion of the two day FOMC meeting came out with a grand plan to boost the US economic recovery progress. Mr. Bernanke announced a monthly $40 billion worth of mortgage backed securities purchase which is open ended and would continue on till 2015. Bernanke also said that the Federal Reserve will continue to maintain Operation Twist through the end of the year until the Fed sees signs of economic recovery.
The decision will add about $85 billion per month to the Fed’s balance sheets by the end of this year. The decision was voted 11 to 1 with the President of the Federal Reserve Bank of Richmond being the sole opponent.
The biggest announcement of its kind, markets instantly reacted in the positive. The Dow Jones Industrials moved up 206 points, closing at 13,540 or 1.55% higher. The S&P500 jumped 1.63% while the Nasdaq moved up 1.33%
The Fed also announced to keep the interest rates unchanged well into 2015. The Fed’s decision could also be felt in the benchmark 10 year treasury notes which rose to 1.32%. The US Dollar Index dropped 0.24% at 79.089
Initial jobless claims saw an increase by 15,000 for the week ending September 8th to reach 382k against the forecasted 369k. The PPI data for August showed a seasonally adjusted increase of 1.7%, beating market expectations.
Crude Oil saw a mild rally, moving up bt $1.30 trading at $98.31 to a barrel while Gold futures moved up bt $38.40 to trade at $1772.10 to an ounce.