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Weekly Wrap Up TRADETHENEWS.COM
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Bernanke Speaks, the Market Freaks May 20 - May 24
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Markets were struck by a wave of volatility this week as a series of unsettling events and data uncovered strains in the 2013 rally. Equity, bond, and currency markets all saw increased volatility as participants pondered whether central bank policies might hit some bumps in the road. The fulcrum point of the week was Fed Chairman Bernanke's Q&A during testimony before Congress, during which many participants detected a more hawkish taper-friendly tone from the chairman. Equity markets traded off hard in the wake of his talk and US equity markets opened lower for the next two consecutive sessions. Hours after Bernanke spoke, the latest China HSBC flash manufacturing PMI report came in at 49.6, missing expectations and registering its first contraction in seven months. The Nikkei lost 7% on the day and the BOJ moved to contain volatility in the JGBs, announcing a ¥2T fund supplying operation after the 10-year yield moved to a multi-month high level above the 1%. Gold, oil and the dollar all traded off pretty hard, and while most of these asset classes made up losses through the end of the week, there was a widespread feeling that the long rally had been derailed. For the week, the DJIA fell 0.3%, while the S&P500 and Nasdaq each lost 1.1%, as the VIX volatility index popped 13%.
- On Wednesday, Chairman Bernanke presented congressional testimony that repeated, practically word for word, statements about policy he has been making since last September. He said the Fed would keep buying $85B of bonds monthly until it was confident of reducing unemployment, while the scale of these purchases might be increased or decreased if warranted by better or worse data. Many market participants interpreted as hawkish his comment that the Fed could start tapering purchases over the next few meetings. He emphasized, that at the moment, there is no case for a change in either direction. The minutes from the May 1st FOMC meeting came out later the same day and repeated many of the same themes, although they did underscored the minority that said they were open to tapering. One member called for an immediate decrease in the rate of QE3 asset purchase program. ...
- On Wednesday, Chairman Bernanke presented congressional testimony that repeated, practically word for word, statements about policy he has been making since last September. He said the Fed would keep buying $85B of bonds monthly until it was confident of reducing unemployment, while the scale of these purchases might be increased or decreased if warranted by better or worse data. Many market participants interpreted as hawkish his comment that the Fed could start tapering purchases over the next few meetings. He emphasized, that at the moment, there is no case for a change in either direction. The minutes from the May 1st FOMC meeting came out later the same day and repeated many of the same themes, although they did underscored the minority that said they were open to tapering. One member called for an immediate decrease in the rate of QE3 asset purchase program. ...
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