The Markets After Big Ben (Bernanke)

Jun 8 • Between the lines • 2713 Views • Comments Off on The Markets After Big Ben (Bernanke)

After a flurry of gains, we are set to see some easing on the Street. Not the quantitative kind from central banks. Big Ben (Bernanke) refused to play ball with the markets on another round of quantitative easing (QE). Markets are already showing their displeasure over the Federal Reserve chairman’s ‘disappointing’ remarks. Asian indices are mostly lower. US markets closed off session highs as Bernanke’s comments tempered hopes of a fresh monetary stimulus. European benchmarks also pulled back from their best intraday levels, notwithstanding China’s rate cut move and encouraging Spanish debt auction.

Globally, Fitch has downgraded Spain by three notches and has warned the US of a similar treatment. In short, it is time to step back after the advance we saw earlier this week.

Gold futures fell sharply, after Federal Reserve Chairman Ben Bernanke refrained from outlining steps that the central bank may take to bolster the economy while risk from Europe’s debt crisis continues to linger. Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,274.79 tons, as on June 6. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,669.08 tons, as on June 7.

Federal Reserve Chairman Ben Bernanke disappointed markets, by offering few clues that further monetary easing was imminent, but said the central bank was ready to shield the economy if financial troubles mount. China announced a surprise interest rate cut by 25bps to combat faltering growth, underlining concern among policymakers worldwide that the euro zone’s deepening crisis is threatening the health of the global economy.

Spain’s credit rating was cut by three notches amid expectations it may soon seek EU help for banks beset by bad debts.

 

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The dollar index, which measures the US unit against a basket of six major, was trading at 82.262 on Thursday, down from 82.264.

Copper prices climbed in heavy volumes after a surprise rate cut by China stirred bullish demand prospects, but gains were soon pared after US Federal Reserve Chairman dashed hopes for further stimulus measures. Copper futures for July delivery closed slightly down at $3.3705 per pound on the COMEX of the New York Mercantile Exchange.

Crude oil futures declined sharply, erasing early strong gains after Federal Reserve Chairman stopped short of signaling imminent new Fed action to stimulate the economy.

India’s crude oil imports from Iran declined by about 38% in May from a year ago & a second month of steep cuts as they switch suppliers to cushion the impact of new US sanctions on Tehran over its disputed nuclear program.

Natural gas fell more than 6% & the most in 4-months, after a government report showed that US inventories rose more than forecasted. The US Energy Department said that gas supplies in the week ended June 1 rose 62bn. cubic feet to 2.877 trillion.

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