Stocks climb on hopes Fed may offer monetary stimulus
Source: Agencies |
August 10, 2011, Wednesday
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Print Edition
Print Edition
SPECULATION that the United States Federal Reserve may announce another round of monetary easing helped stock markets rebound yesterday after many entered official bear market territory.
A statement from the Fed was expected later yesterday, and hopes that it will be forced into more action helped most stocks in Europe and Wall Street post solid gains.
Investors still remained worried, however, about the consequences of the US credit downgrade, Europe's debt crisis and mounting expectations of a global recession. That's evident in the continued strength of traditional safe haven assets, like gold and the Swiss franc, which have been hitting regular record highs lately.
"While we are still not convinced the Fed is prepared to announce significant new monetary policy steps, changes in the statement aimed at supporting the financial markets are likely," said Vassili Serebriakov, an analyst at Wells Fargo Bank.
The Fed talk helped Wall Street recover following dizzying losses the previous session - the Dow Jones industrial average gained 1.9 percent to 11,022 while the broader Standard & Poor's 500 index rose 2.3 percent to 1,145.
In Europe, the FTSE 100 index of leading British shares closed up 0.3 percent at 5,085 while France's CAC-40 rose 0.8 percent to 3,153. Germany's DAX though continued to underperform its peers, trading 0.3 percent lower at 5,899.
One option for the Fed is to announce that it is considering another monetary stimulus, which would be its third in the last three years. Kenneth Rogoff, a Harvard University economist, said that may be the only hope to help the US avoid a Japan-style lost decade of low growth and benign prices.
Louise Cooper, a markets analyst at BGC Partners, said another stimulus could take equity markets up "substantially" though it "may not pack quite the same punch."
Stocks around the world were supported after August 2010, when the Fed announced a US$600 billion monetary easing, which ended in June. Since that easing ended, "chaos has ensued," Cooper said.
In the oil markets, recovering stocks helped oil prices recover. The main benchmark rate was up 30 cents at US$81.61 a barrel. Earlier it had fallen to US$75.71, its lowest since September 2010.
The recovery in stocks has come after many markets entered bear market territory, whereby they have fallen by more than 20 percent since their peak as investors looked for relatively safer assets to park their cash, such as gold and the Swiss franc.
The other major worry in the markets remains Europe's debt crisis, and there are signs that the recent stresses may be easing, albeit as a result of an intervention by the European Central Bank on Monday.
A statement from the Fed was expected later yesterday, and hopes that it will be forced into more action helped most stocks in Europe and Wall Street post solid gains.
Investors still remained worried, however, about the consequences of the US credit downgrade, Europe's debt crisis and mounting expectations of a global recession. That's evident in the continued strength of traditional safe haven assets, like gold and the Swiss franc, which have been hitting regular record highs lately.
"While we are still not convinced the Fed is prepared to announce significant new monetary policy steps, changes in the statement aimed at supporting the financial markets are likely," said Vassili Serebriakov, an analyst at Wells Fargo Bank.
The Fed talk helped Wall Street recover following dizzying losses the previous session - the Dow Jones industrial average gained 1.9 percent to 11,022 while the broader Standard & Poor's 500 index rose 2.3 percent to 1,145.
In Europe, the FTSE 100 index of leading British shares closed up 0.3 percent at 5,085 while France's CAC-40 rose 0.8 percent to 3,153. Germany's DAX though continued to underperform its peers, trading 0.3 percent lower at 5,899.
One option for the Fed is to announce that it is considering another monetary stimulus, which would be its third in the last three years. Kenneth Rogoff, a Harvard University economist, said that may be the only hope to help the US avoid a Japan-style lost decade of low growth and benign prices.
Louise Cooper, a markets analyst at BGC Partners, said another stimulus could take equity markets up "substantially" though it "may not pack quite the same punch."
Stocks around the world were supported after August 2010, when the Fed announced a US$600 billion monetary easing, which ended in June. Since that easing ended, "chaos has ensued," Cooper said.
In the oil markets, recovering stocks helped oil prices recover. The main benchmark rate was up 30 cents at US$81.61 a barrel. Earlier it had fallen to US$75.71, its lowest since September 2010.
The recovery in stocks has come after many markets entered bear market territory, whereby they have fallen by more than 20 percent since their peak as investors looked for relatively safer assets to park their cash, such as gold and the Swiss franc.
The other major worry in the markets remains Europe's debt crisis, and there are signs that the recent stresses may be easing, albeit as a result of an intervention by the European Central Bank on Monday.
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