by Chris Becker
Macro Wrap
The big boob was tucked away in its well-worn brassiere last night, as the Fed expectedly – unexpectedly – whatever – decided to continue Operation Twist (buying longer dated bonds and selling short term bonds to lower long-term interest rates to encourage borrowing for investment).
Growth forecasts were slashed to more realistic (but still optimistic, in our opinion) rates (GDP growth out to 2014 with a 2 in front of it, possibly below that for the rest of this year), whilst unemployment rate forecasts were raised.
For the world’s largest economy, with a burgeoning population and household balance sheets in tatters, this isn’t good enough and the Fed knows it.
On the other side of the Atlantic – while the Americans are separated from the Brits by a common language, they do understand the same acroynms, with the Bank of England looking to extend its QE program as well.
Hey, when something you try doesn’t work – just keep trying it yeah? What’s 50 billion more pound un-sterling?
What buoyed European markets was the re-election of the same people, more or less, that got Greece into trouble in the first place, with a coalition government formed that will bow down and do what the Troika says. Some democracy. Peripheral bonds were bought up, so were stocks, as the speculators went wild knowing that more taps will be turned on for asset markets, whilst the average bloke on the street will continue to get screwed.
Too pessimistic? You don’t have your eyes open.
What to expect today and tonight
Regionally New Zealand releases its GDP for Q1 and we get flash China PMI Manufacturing at around midday or so. Locally the RBA will releases its quarter Bulletin piece and some interesting stats on impaired assets for the banks, whilst the ABS continues to release detailed Census stats which will keep the boffins busy.
SPI futures are up 0.4% points before the open of the ASX200, probably at around 4110 points, with the miners likely to weigh down the local bourse on lower commodity price outlooks.
Market Summary
Here’s a quick snapshot of last night – the biggest moves were in commodities, particularly energies as US oil inventories grew larger unexpectedly:
Gold prices were lower – almost cracking $1600USD at one point on the disappoint sour milkie wilkies. Still no breakout:
In bond markets US Treasuries were sold off slightly, but it was peripheral bonds that improved, with Spanish 10 years down 30bps and Italians about half that.
In equities, US markets were all flat on response, but remain with a bullish bias:
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