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.
Currencies moved against the U.S. dollar after the FOMC meeting minutes were released yesterday at 2 p.m. EDT.
Overnight emerging markets closed higher despite disappointing data from China, where the preliminary manufacturing survey hit a nine month low of 47.8 for August, compared to July’s print of 49.3.
Speculation this week that the European Central Bank is actually working on creating policies to ease the euro zone debt crisis sent the EUR/USD to a roughly seven week high.