Weekly Reports | Sep 14 2012
By Rudi Filapek-Vandyck
Helicopter Ben has over-delivered. Not exactly a habit among the world's central bankers. By doing so, he might possibly have changed the future.
Of course, we still have to find out exactly how the Fed's ultra-aggressive, super accommodative policy will feed into the real world that is a sluggish US economy, but right now the world loves Ben and in particular the sugar coated stimulus that is keeping the costs of debt low in the world's largest economy.
Taking a slightly different view on the whole matter, the fact that Bernanke and Co saw no other option than to bring out the Big Bazooka is in itself a reflection of how dire the underlying situation is, of course. One excellent analysis as to why an imminent recession for the US economy pre-today's announcement still was a not-to-be-dismissed possibility can be found here: http://advisorperspectives.com/dshort/guest/Lance-Roberts-12091-Analyzing-The-ECRI-Recession-Call.php
You can bet all your money FOMC members have been pondering similar stats, insights and conclusions in recent weeks, hence why today's announcement brought out the aggressive policy measures it did.
As far as economic data are concerned, the world's focus has now irrevocably shifted to the US labour market. Will 7% unemployment be sufficient for the FOMC to start rethinking QE3? Only time will tell. But if you are a realist, like I try to be, and with today's official admission by the Fed that 8% looks more likely by the end of 2012, then ongoing monetary support from the Fed is here to stay for much longer; so much has become clear today.
In case you missed it (see my Tweets on Twitter), Glushkin Sheff's David Rosenberg concluded earlier this week that in the "New Normal" financial markets are no longer guided by the economy, but they take their cue from central bank policies and intentions instead. That was a very prescient observation and one that may well remain among us for much longer too.
As far as economic data are concerned (yes, I know, I just implied they are no longer of A-grade importance) today will still see the release of inflation and unemployment data in Europe, while the US brings out updated insights regarding business inventories, retail sales, industrial production, consumer confidence (Univ Michigan) and the CPI calculation for August. Post Bernanke's Big Bazooka announcement one is inclined to think most of these data will provide poor outcomes.
On Monday, Australia sees quite a few stocks go ex-dividend and the next concentration of ex-divs will be Thursday. Japanese markets will be closed on the Monday. Overall, the week looks a bit thin as far as scheduled economic events are concerned. Yes, we have the RBA minutes out on Tuesday (interesting for journalists only) and there are a few retailers and commodity companies that will update on their financial performances. Otherwise, mostly B-grade economic data colour the calendar in the week ahead.
Friday sees the widely followed IFO September Survey for Germany being released, while for the US it's one of those rare quadruple witching trading days. Should be fun.
For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.
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