Asian markets closed mixed today on the back of the testimony by Federal Reserve Bank’s chairman Ben Bernanke. Mr. Bernanke once again delivered well prepared speech to the market which was tailored to keep the volatility in the market towards its ultra-low levels. He confirmed that the Fed policy is not a “preset course” and it is completely dependent on the incoming economic data which pushed the US indices up and drove the safe heaven down to its knees once again.
Ben Bernanke maintained that the Central bank is still on track of tapering the quantitative easing program however, if the conditions in the markets start weakening, the Central Bank will not only stop tapering but is also capable of increasing its asset purchase program. The markets finally did understand his message but there is still confusion if Fed will start tapering by September or not. Perhaps Mr Bernanke could clarify this final piece of the puzzle in his second round grilling which is due later on today around 14:00 GMT.
Shanghai index is under constant selling pressure for another day after the finance minister’s reluctance to ignite another round of quantitative easing and still on track that the government could maintain their GDP target of 7.5% for 2013 in the absence of such program. It seems highly unlikely that such a target could be achieved for the rest of the year in the absence of his support.
The Shanghai Index was the worst performing index during the session which closed with a loss of -1.07%. The index is up nearly 0.74% for the past five days. The Hang Seng index was the second worst performer and closed with a loss of 0.17%. However, the Nikkei index closed in a positive territory and closed with a gain of 1.33%.
Coal miners were among of the biggest gainers in Hong Kong and shares of China Shenhua Energy Co. and China Coal energy both surged nearly by 5.3% and 3% respectively. Exporters gained once again in Tokyo on the back of a weaker yen and shares of Mitsubishi Corp gained nearly 11.1%.
European stock markets are trading lower during the early hours of trading. The MPC voting results yesterday took the market by surprise by vanishing any hopes for any further quantitative easing when the only two hawkish members also turned their back against any further asset purchase program which pushed the GBP up against the basket of currencies. It was a surprise for the FTSE 100 index which dropped on this news first but perhaps a more supporting statement from Bernanke was all it was needed for the index to take a U turn.
The economic data- Retail Sales numbers for the Sterling economy are due later on today at 08:30GMT and the forecast is for 0.2%. However, given blessed sun shine in the UK, this number could be weak as less and less shoppers like to spend time under the tube light.
European political soap opera is still occupying the stage. The corruption allegation against Spain’s Prime Minister has embroiled the 10 year yield which is stubbornly above the 4.70% and the country is going to auction another round of 10 year bond auction which could affect the yield further. Greek’s are struggling with their turmoil during which they had to put a provision of 25K jobs cut in the public sector which is a condition for their next tranche of the bailout fund. The Greek parliament, who is no longer new to these conditions imposed by their lenders, was able to successfully pass this bill in their parliament. This has certainly brought a breather for the volatility in the market.
The DAX Index is the worst performing index during the session which is trading down with a loss of -0.37%. The index is up nearly 1.97% for the past five days. The CAC 40 index is the second worst performer and is also trading down with a loss of -0.05%. However, the FTSE 100 index is trading up for a surprise and is up nearly by 0.14%.