28th August 2014 - Global Markets Update
Global markets are expected to be muted today as several European countries release key data before tomorrow's important inflation announcement.
Markets in Asia took a slight step back from the near 7yr highs of earlier in the week. With Japan reporting on a range of economic data today and tomorrow and the EU looking to report on inflation before the end of the week there were plenty of opportunities for profit taking in Asia. The Nikkei tried to hold onto its gains but ended up 0.5% down on the day. China releases data on manufacturing next week and this along with other data due later in the week should give a good indicator as to where they stand at the moment.
All eyes are on Europe at the moment and the ECB. With tomorrows announcement on inflation predicted to be 0.3%, down from the 0.4% in July there is expectation that an announcement on some form of policy change could come as soon as the 4th of September. With several of the EU's big economies performing uncharacteristically poorly of late there is plenty of room for interpretation on how the ECB is going to play its next hand. Despite their unusual attempt to spur the economy last time their policy changes did very little to create momentum in the EU and many felt that it was too little in the way of stimulus. Now, with a more dedicated approach promised and more liquidity looking to head to the European Union we could start to see a turnaround within the next few months. At least that is what Mario Draghi will be hoping to achieve.
In the US the markets are as strong as ever with the S&P 500 making its second record close in as many days. Confidence in the markets did wane slightly yesterday as many will be looking for some direction as to what is happening in Europe and how it may affect the US. With their economy well and truly in expansion it is hard to see whether the US indexes could weather such volatility in Europe considering the amount of exposure both continents have to each other. The Federal Reserve seems to be now concentrating on fixing the employment market and looking to get wages back in line with inflation. Janet Yellen poignantly stated that monetary policy was not enough to fix the disparity seen currently and that the government would need to look at fiscal policy to address this.
It's possible that the markets have run away on the news from the ECB and their proposed stimulus plans and have been over confident in what may be implemented. Expect pullbacks as the week closes out.
Major Indexes as of28th August:
Index % Change Close/
DOW Jones (+0.09%)
S&P 500 (+0.00%)
FTSE 100 (-0.14%)
CAC 40 (-0.42%)
Nikkei 225 (-0.48%)
Hang Seng (-0.72%)
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