Markets show nerves ahead of Jackson Hole
Fiona Cincotta August 30, 2012 4:15 PM
<p>European markets slipped lower in early trading on Thursday, tracing the Asian markets down as investors show their nerves ahead of the Bernanke speech at […]</p>
European markets slipped lower in early trading on Thursday, tracing the Asian markets down as investors show their nerves ahead of the Bernanke speech at Jackson Hole tomorrow. Broadly speaking traders have pulled out of equities whilst they await the speech to scrutinise any possible hints of further stimulus.
Trading volumes continue to be extremely low, highlighting investor reluctance to place trades before the speech, which is perhaps even more highly anticipated following better-than-expected pending home sales in the US yesterday. With the US housing market looking stronger than in recent times, will Bernanke see this as an excuse to pause and keep the markets guessing? What is essential to remember is that the closer we are to the US Presidential Elections the less likely we are to see the all clear from Bernanke for more Quantative Easing and as such, there is an element of time pressure is starting to emerge.
As Draghi will not be in attendance at Jackson Hole, it would appear that he is conscious that he may disappoint the markets if he speaks out too soon or if details of the bond buying scheme don’t live up to expectations. It is widely anticipated that he will be working tirelessly over the coming days to try to smooth over any objections from the German Bundesbank as quietly as possible, before adding flesh to the bone of the bond buying scheme in the meeting on September 6. If for any reason he is unable to add more details, a market reversal could be seen with investor optimism at high levels.
In UK trading, miners weighed heavily on the FTSE as the cooling Chinese economy has triggered a reduction in demand for commodities such as iron ore and steel. Kazakhmys, Evraz and Vedanta had all shed over 2.2% by mid morning.
WPP topped the loser board in morning trading after the advertising group lowered its full-year outlook. They are now forecasting like for like revenue growth for 2012 of 3.5%, compared to the budgeted 4.5%. This stock is often seen as an indicator of economic conditions to come and so the downward revision of its full-year revenue forecasts is affecting broader sentiment. The stock lost 2.9% of its value by mid morning.
Barclays also hit the headlines this morning with news that it has promoted from within to fill the vacant CEO position. Anthony Jenkins, currently head of Barclays Retail and Banking Business, takes over with immediate effect. The share price saw little change, trading down 1.7%.
With little domestic data due this morning trader focus will be on the US initial jobless claims due this afternoon.
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