Market Update - 2 August 2012

Yesterday, the ringgit lead gains among emerging Asian currencies but the upside was limited by qualms that authorities in the region would intervene to check currency gains amid a slowing global economy.

The Fed refrained from announcing concrete plans for fresh stimulus but signaled that it will pump fresh stimulus if necessary into the weakening economic expansion to boost growth and reduce an unemployment rate that’s been stuck at 8 per cent or higher for more than three years.

The Fed has also retained its goal of retaining low interest rates till late 2014.

The euro failed to rally from a decline yesterday before ECB policy makers meets to discuss ways to tackle the region’s debt crisis today

Whatever Mario Draghi does today, economists say doing nothing is not an option. “If Draghi just comes out with a do-nothing, markets are going to react extremely badly and the ECB will have a full-blown crisis on their hands” said chief European economist at Societe Generale SA in London

Germany’s credit ratings affirmed by S&P citing Germany’s highly diversified and competitive economy with demonstrated ability to absorb large economic and financial shocks

Wall Street sank as markets were disappointed at the Fed’s decision: The Dow -0.25%, S&P -0.29% and Nasdaq -0.66%.

KLCI edged 0.05% higher to 1,632.47 as markets waited for the FOMC results. The lack of further stimulus may further dampen sentiments today, and the KLCI may see further downside pressure.

Fitch affirmed Malaysia’s long-term foreign and local currency issuer default ratings at A- and A respectively with stable outlook.