Quote of the Day
The most difficult thing in life is to know yourself.
The market continues to react to any indication that the US Fed will join other major economies and embark on another round of quantitative easing. In overnight trading the US dollar has been easing ahead of today's release of the minutes from the US FOMC meeting from June. The market is anticipating that there may be some definitive comments that may lay out the conditions that the US Central Bank may have set at the last meeting that will indicate what they may do at the August Fed meeting. I am not sure there will be anything new in the minutes than what was already discussed at Bernanke's' press event after the last meeting. However, the market is slowly building in a new round of QE as the US economic data continues to suggest a further slowing of this economy.
The current situation reminds me of the Dunkin Donuts commercial from awhile back... the "World is Running on Dunkin." The global economy can best be described as the "World is Running on Easing and Money Printing." There is hardly any organic economic growth in any of the major global economies, rather the world's central banks are on a program of trying to inflate their way out of the malaise that is spreading around the world. As I have been suggesting market participants may be slowly moving away from being focused on the current economic and fundamental situation and moving more toward the perception trade. The perception trade or trading and investing based on what the economy might be like dominated trading decisions on and off over the last three years as central banks added new easing measures. I still think we are moving toward a sentiment that bad economic data could actually be good for most risk asset markets based on a view that bearish data will result in even more easing.
Global equity markets were mixed over the last 24 hours as shown in the EMI Global Equity Index table below. The Index is now down by 2% for the week pushing the year to date performance back into negative territory (minus 0.8%) for the year. Brazil took a bit hit in the last 24 hours as did Canada. Three of the ten bourses in the Index are in negative territory for the year with Germany still holding the top spot as the weakening euro is a positive for this export oriented economy. Global equities have been a negative for the oil complex as well as the broader commodity complex.