After what some may have labelled as a gentle day during UK trading hours, the US markets opened and Fed Chairman Ben Bernanke took his stand to bring some relief to the market bulls.
This relief came in the form of round 3 of quantitative easing, with the Fed promising to buy $40 billion a month of assets until this bitter financial taste decides to vanish and jobs figures go back to the norm. Mr Bernanke will also keep extending the average maturity of his asset holdings for the remainder of this year, and vowed to keep interest rate at their lows until at least 2015. All this was music to the ears of concerned market participants, but the Fed Chairman did still state that this may not stamp the end of the financial crisis, with help needed from politicians to get people in employment again.
While all of this was going on, there were violent protests against the US Embassy in the Middle East as demonstrators showed their anger at a low budget film based on the Prophet Mohammed that had been posted on YouTube. In Yemen, over a dozen people were injured in the protests, and a further thirteen in Cairo. As all of this started to unravel, two US warships made their way for the Libyan coast in an escalation of tensions in the region.
Back in the UK, yesterdays session for the Blue chip index bought the price up 37.8 points to close at 5819.9, the highest close in in 3 weeks, boosted by optimism over the upcoming Fed stimulus and the possibility of increased merger and acquisition activity.
As far as macroeconomic data goes, there's little to nothing from this side of the Atlantic, so eyes will be focussed again on the United States where August's inflation and retail sales data are due out at 1230 GMT. The last bit of data for the week is the consumer sentiment data, which is being released at 1355 GMT.
Gold is on a six month high today, extending the previous session's 2 percent gain. During the day, market participants saw a 56 buck trading range, with lows of 1716.5 and highs of 1772.5. By the end of the session, the yellow brick had closed it's doors at 1767.0 after gaining 36.2 dollars on the back of fears of higher inflation further down the line, damaging the egos of traders who stuck to that adage 'buy the rumour sell the news'.
Brent oil on a November contract increased 37 cents to the end the session at $115.59 a barrel, it's highest level since May 3rd amid worries that this week's attack on the U.S consulate in Egypt, Libya and Yemen could lead to a return of violence and affect production.
The euro was sharply boosted yesterday by the Federal Open Market Committee’s decision to start buying mortgage debt until the job market improves. The fact that a limit was not mentioned possibly implies expectations of tough times ahead as well as reassurances the Fed will do whatever it takes to support growth and in turn push unemployment down. All in all, it did hurt the greenback so the EUR/USD pair moved up 87 pips to $1.2985
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