Bernanke plays a mean game
by Peter Switzer
Anyone doubting the willingness of many investors to believe that a euro-solution is possible and that markets can head up again this year only has to look at what Wall Street has done in the past three sessions. And last night’s effort even makes the point more emphatically.
To sum up, we have three market challenges — the eurozone mess, a slowing China and a slowing US economy.
The Europeans are still a question mark continuing to disappoint with Sunday week’s Greek election being the flashpoint for the market. Meanwhile China cut interest rates by 0.25 per cent for the first time in four years and this certainly helped stock prices. And the US waited, praying for a hint that Federal Reserve chairman Ben Bernanke would refer to more quantitative easing — he played a mean game of poker, keeping his cards close to his chest.
In a nutshell he basically said to forget about easing monetary policy right now but if the economy slows, the Fed will move.
The end-result was the Dow was up 46.17 points or 0.37 per cent to 12,460.96 and the S&P 500 lost 0.14 points or 0.01 per cent to 1314.99.
Bernanke told the congressional panel that the economy is growing at a moderate pace but the jobs market and Europe’s debt problems were the big challenges.
The Fed meets just after the Greek election and that leaves it in a good position if the poll spooks global financial markets.
It’s a wait and see game and Bernanke is a close watcher of stock markets as he thinks the “wealth effect” works through stock prices. (CNBC)
The good news
A good sign was that the VIX or fear index has fallen to 21, which means stock buyers are coming back to the market.
Another positive was some encouraging noises coming out of Europe to help Spain’s banking system, despite the country’s leaders not having asked for help!
The European Union’s markets liked those noises.
We’re inside a waiting game and lets hope the noises eventually beat out a sweet song for those who determine the direction of stock prices. I only wished Europe’s leaders could play poker as well as Ben Bernanke.
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Published on: Friday, June 08, 2012
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