Market Update - 3 Sept 2012

The much anticipated Jackson Hole Economic Symposium took place on the weekend and all anybody, not least the financial markets, cared about was whether Bernanke would change his language re: QE3. Well, he didn’t.

He still is “gravely” concerned about the employment situation in America and he still believes that the best way to combat the problem is to launch more quantitative easing, telling listeners that he would not rule out further easing.

USDMYR opened around 3.1200 where it pretty much closed last week again expecting a quiet     market and rangey, 3.1000-3.1500 but I will be bias on the upside with market expecting some correction in September but there will be contrarians who buy sell on rally to keep the 3.1500 in tact.

AUDMYR moved significantly lower from last weeks 3.2400 to today’s 3.2050 as AUDUSD took another beating over NY close and this morning’s Asia open, expect more AUDUSD downside testing 1.0100.

US treasuries spiked higher with yields falling 8bps on the night to 1.55%. Gold rose $35 or 2.1% to close at $1691.85, the highest since March, this despite a 1% fall in the moments immediately after the speech notes were released. The S&P closed up 0.51% and he Dow up 0.69%.

Meanwhile Spain’s largest region Catalonia was cut to junk by S&P; the news sent Spanish 10 yields up 27bps to 6.80% and the Euro lower and hurt equity indices on both sides of the Atlantic, which managed to hold on to overall gains. The Euro Stoxx 50 rose 1.5%.

ECB governing council member Ewald Nowotny gave us a stark reminder of the tough economic conditions in Europe, signalling that the bank will be downgrading their growth forecasts for the Euro Zone next week.

The official Chinese manufacturing PMI figure was released on Saturday morning and caught most     economists off guard; the figure fell to 49.2 from 50.1 in July.

Markets were closed when the figure was released but I expect a knee-jerk risk-off reaction today as the news headlines reverberate around Asia. It’s the first contraction we’ve seen since mid-last year with the main driver being a drop in orders, particularly export orders.