Asian markets closed lower on Wednesday by erasing their gains which were made yesterday . Although there was a positive start for the equity market during the Asian trading session on the back of optimism that Fed will keep their asset purchase program little bit longer, perhaps till the end of the first quarter next year. But, the momentum changed its direction on the back of the chatter that the Chinese banks have almost tripled their bad debt write off during the first half of this year. This triggered the profit taking signal amid investors.
US futures are also trading lower during the early morning, as the bad news is a good news effect is fading away. The major point which could be taken away from yesterday’s report was that the tapering talk may not come on the big screen till March. You have to thank the politicians if you are a QE lover, although this report was pre political drama, but the expectations are that the October report may not be able to provide a clear picture about the health of the US economy, and the report may not only be dreadful, but there will be questions asked about the reliability of this report.
As long as the US keeps pumping the artificial money in the market, this is a good news for the emerging markets which has been beaten down extremely bad since the tapering talk has taken place. The talk about tapering also pushed the dollar index up, but now given the circumstances, the index started to break down from its highest levels.
Back in Europe, investors are more focused towards the strength of the euro against the dollar which is a concern for many. The French President has been vocal about the strength of the euro and he has asked already several times to the ECB president Mario Draghi to step in and take some action. Interestingly, the euro was at the time was trading near the 1.32 level and provided that the euro is near the 1.38, this definitely without any doubt could increase further pressure on the ECB’s president. The French industry minister, Arnuad Montebourg, urged the ECB yesterday once again to take some visible steps to address this matter before it is too late.
The FTSE 100 is also seeing an increase in the selling pressure as the gains which were made yesterday are eroding ahead of the Bank of England’s minutes meeting. There may not be any ammunition left so we are not expecting any firework during this meeting because the Bank of England and IMF has already upgraded their forecast for the sterling economy. However, there are hopes that the bank may provide some clarity about the forward guidance and the unemployment rate.