News headlines have dominated markets for the past 24 hours. Philly Fed President Plosser delivered a blow to the U.S. markets yesterday when he said that this newest round of stimulus via QE3 would have limited benefits for jobless numbers and growth. Investors who have been skeptical of central bank actions from both the Fed and ECB took this as a confirmation on their theory of diminishing returns. Street demonstrations in Madrid last night became violent and as of this writing there are protests in Athens as the citizens of Spain and Greece show their discontent with austerity measures as both respective governments try to bring their budgets under a semblance of control.
The effects of the news has sent global equity markets lower led by the losses on Wall Street yesterday which promptly carried into all Asian bourses. European equities have tracked lower today and the EUR finds itself under more questions as Spanish bond yields have produced levels that will not be a welcome sight for Spain nor their E.U. counterparts who are likely to foot the bills down the road.
Crude Oil is approaching 90.00 USD a barrel as WTI finds itself nearly ten dollars off of its recent highs, this as the ‘glowing’ residue from the Fed and ECB ‘confidence game’ has abruptly disappeared and worries have resulted in negative momentum among risk assets as speculators betting on upside have made for the exits. Gold is near a consolidated 1766.00 and may face pressure from the reemergence of fears surrounding poor global growth, and faulty policy that has no clear path – this as central bankers from the Fed led by Mr. Plosser and Dallas Fed President Mr. Fisher have publicly taken less than optimistic stances regarding current monetary policy. And in addition, Germany and France’s bickering about ECB policy and oversight, and Spain’s desire not to face a harsh economic realty have all fueled the upheaval. While there are many who fear inflation long-term it may prove wise to make sure the economic boat doesn’t sink in the meantime and take down the U.S. and E.U. economies with it – although some would say it is too late already.
The USD has gained against the GBP and AUD as of yesterday also. The JPY has gained strength and this combination of results points towards a desire for preservation instead of risk. Earlier today Italian Retail Sales figures missed their already negative outlook as they turned in a mark of minus -0.2%. Yesterday’s CB Consumer Confidence number from the States did beat expectations, but was quickly dismissed after Philly Fed President’s Plosser’s less than promising remarks and a profits warning from Caterpillar Inc.. This coupled with the growing evidence that politicians and their populations stand in the way of any quick foundation stones being put on the ground in Europe even as the ECB has put its ‘hopes and goals’ forth have combined for a rather volatile mix. And we haven’t even reached October yet. It is certain that all the efforts of Central Bankers mandates the past month and a half are going to be put to the test over the next few weeks as their frameworks are scrutinized by a large swatch of investors who have rising doubts.
New Home Sales and Crude Oil Inventories data will come from the States in a couple of hours. The housing sector appears to be stabilizing in the States, but the numbers produced via the S&P/CS Composite-20 HPI have a long way to go before they bring about a massive change in sentiment. Tomorrow will be an important day in terms of data as German jobless numbers, an Italian 10-Y Bond Auction, and the U.K. Current Account numbers are brought forth. From the States tomorrow weekly Unemployment Claims, Final GDP, Core Durable Goods, and Pending Home Sales figures will all be published.
But again it is headline news, the kind that stirs trouble, that has hit the market the past day. Street protests in Spain and Greece will do little to sooth the souls of investors who are looking for stability and answers from the European Union. The forex, commodities, and equities markets all look like they will continue to operate under shadows of discontent.