Overnight emerging markets equities were broadly lower. Market participants cautiously moved to the sidelines ahead of U.S. Federal Reserve Chairman Ben Bernanke’s speech from Jackson Hole at 10 a.m. EDT today.
Earlier this week I mentioned Germany’s Chancellor Angela Merkel was meeting with Chinese Premier Wen Jiabao concerning the euro zone and trade between the two markets.
Overnight equity markets were under pressure from commodity prices and poor earnings results ahead of U.S. Federal Reserve Chairman Ben Bernanke’s eagerly awaited speech tomorrow at the Jackson Hole central bank summit. Hong Kong lead emerging markets lower by 1.19% as the entire region closed in a sea of red ink.
Gold prices remained flat after this morning’s Commerce Department report showing U.S. GDP grew in line with analysts’ expectations of 1.7%. This is shy of the of the 2% target thought to keep the U.S. economy from stalling and falling back into a recession.
Overnight emerging markets continued to seesaw, shifting between risk-on and risk-off sentiment ahead of the Jackson Hole summit this weekend and the ECB meeting September 6. The seesawing action is clearly seen in China, where equities that scraped and fought to be in green in the prior session are now in the red after last night’s session.
The euro received some support against the U.S. dollar as European Central Bank President Mario Draghi announced he will not be attending the Federal Reserve’s annual Jackson Hole summit this Friday.
Overnight emerging markets remained cautious, holding out hope for any clues that China or the U.S. will initiate additional easing. Markets last night were mostly in the red with emerging markets giant China and Hong Kong in the green.
The US Federal Reserve released its much anticipated minutes Wednesday last week, with the upshot that if the economy did not improve then a third round of quantitative easing (QE3) was possible. In the recent past such news was enough to send U.S. stocks higher, but the S&P 500, Dow Jones Industrial Average, and tech-heavy NASDAQ all closed lower for the week. The Middle East was a different story.
The release of the Fed minutes showed that further quantitative easing — a possible QE3, will likely occur if the economy does not improve. Since the economy doesn’t look like it is improving, traders took this as an indication of likely additional easing, and creating incentives to get into gold ETFs.
Overnight Asian emerging markets reacted strongly, and negatively to St. Louis Fed President James Bullard diminishing the need for the FOMC to begin a third round of quantitative easing (QE3) anytime in the near future.