Member Article

FTSE100 misses out on Bernanke Bounce

Rumours that Jens Weidmann was to depart from his Presidential position at the Bundesbank (Germany’s central bank) swept across news channels today. As one of the most vociferous opponents of the ECB’s bond buying program, suggestions were that his potential resignation arose having lost the battle against other members of the ECB regarding the purchases of Spanish and Italian debt. This was possibly a contributing factor to the gains seen on equity markets throughout the morning.

Federal Reserve’s Chairman Ben Bernanke came out with comments from Jackson Hole that were originally interpreted badly by the market. Commentators have suggested that the statement was picked apart by algorithmic computer trading strategies, picking out key words that they thought implied Fed intervention was unlikely. It caused the evaporation of the 100 point gains on the Dow Jones Industrial Average, before human traders digested the comments and interpreted them more accurately, namely that the Federal Reserve will provide additional policy accommodation if required. It was also clear from the speech that Mr Bernanke was dissatisfied with the state of the US economy, making particular reference to the unemployment rate that is currently 8.3%.

The moves up in equity markets came despite economic data showing that unemployment rose to 11.3% for the Eurozone, with inflation for the region also rising to 2.6% in the year to August, form 2.4% to June. European indices put on 1% plus gains, with the FTSE 100 lagging closing down 0.14% at 5711.

This was posted in Bdaily's Members' News section by James .