Month: September 2012

Five reasons why QE3 not as likely as you think

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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If you’re betting that the Fed is about to stimulate the economy in a big way on Thursday, you may be in for a rude awakening.

So says, Stephen Stanley, Pierpont Securities Chief Economist.

Stanley thinks that the QE3 euphoria that’s swept the Street after last Friday’s jobs number is misguided. (Bulls believe the lackluster jobs data gives Ben Bernake a reason to act.)

However, Stanley argues that there are many other influences at play and when you add them up, the environment doesn’t warrant Fed action.

1. In the past when the Fed has implemented QE, part of the action has been generated by the Fed’s concern about asset prices. “This time around the market is at a 4-year high.”

2. The case for spurring growth is weak. Except for jobs, most of the recent economic data has been strong, at least relatively.

3. Inflation expectations are quite a bit higher than at other times when the Fed has implement stimulus.

4. The Fed would step on Operation Twist. “They’ve pounded the table that extending Twist was a big deal,” says Stanley.

5. The election plays a role. “The Fed is a campaign issue this year. It would be waving a red flag among conservatives if they do QE now.”

All told, “This time the situation is very different,” Stanley says on CNBC’s Fast Money. “The market expects QE but the signs just aren’t there.”

Also read:
Fast Money’s Favorite Dividend Yielders
Top Secrets of Pro Traders
10 Top Stocks for the Long-Term Investor

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How Fed may boost economy with a surprising big stick

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Federal Reserve’s monetary policy makers are widely expected to adjust the central bank’s monetary policy at the conclusion of their two-day meeting later this week. But the most important part of this adjustment may be simply a change in the way the Fed discusses its policies.

This may be surprising to many people. After all, Fed Chairman Ben Bernanke described the “stagnation in the labor market” as a grave concern. Shouldn’t the Fed’s response be more muscular than wordy?

Related Links:

5 Possible Fed Moves

Fed Feeds ‘Perverse Addiction’: Corker

QE3 Won’t Push Banks to Lend: Bair

Whatever happened to talking softly and carrying a big stick?

Traditionally, changes in Fed policy mostly came in the form of changes to targeted interest rates or monetary aggregates. The Fed would announce that it was raising or lowering, say, the overnight Fed Funds rate target. In order to hit the target rate, the Fed would buy or sell short-term Treasury bonds in so-called “open market operations.”

More recently, we’ve seen the Fed engage in unconventional monetary operations that have collectively been known as “quantitative easing.”

These have involved the Fed purchasing assets such as mortgage-backed securities and longer-term Treasurys, which have greatly expanded the balance sheet of the central bank.

But the Fed has also long relied on something a bit more subtle. It seeks to influence markets through the language of its announcements, attempting to change market expectations about the direction and duration of interest rates. This is why you see so many Fed-watchers closely scanning Fed minutes, speeches by Fed officials and official statements for hints at what might come next.

Recently, communications strategy has been seen as increasingly important. At least a sizeable group of economists argue that what’s known as the “signaling channel” may be the most important tool in the Fed’s monetary policy arsenal.

To understand why how the Fed talks about its policies might be more important than the particular operations it uses to implement them, it helps to take a step back and look at why monetary policy is viewed as effective in the first place.

Under most standard economic models, economic activity is largely dependent on long-term interest rates. The market arrives at long-term interest rates based on its view of relevant economic risks and expectations of average future short-term rates. For example, the return on a six-month Treasury bill should be around the same as the current return on a three-month bill plus the expected return on a replacement three month bill purchased three months from now.

This implies that one of the ways the Fed can influence economic activity is by changing expectations about the path short-term rates are likely to take. This sort of thinking is one of the reasons that the Fed began communicating very clearly that rates were likely to remain low for an extended period.

A recent paper by economists Jens H.E. Christensen and Glenn D. Rudebusch of the Federal Reserve Bank of San Francisco demonstrated that quantitative easing was more effective in the US than the UK The key difference – the Fed was more open about its plans.

The differences between the US and UK reactions of the expectations and term premium components of longer – term yields to central bank bond purchases are notable – especially given the similar bond purchase amounts and rationales in the two countries. The contrasting channels of influence of the US and UK unconventional policy can perhaps be traced to differences in policy communication and financial market structure. Specifically, with regard to communication, the Federal Reserve was clearly more willing to provide monetary policy forward guidance near the zero bound.

In Jackson Hole, Wyoming last month, Bernanke put the Fed’s communications tools at the center of his speech. The speech was just over 4,500 words and Bernanke’s talk about Fed communications ran from around the 1,900 word mark to the 2,400 word mark. The signaling channel was, literally, central to his speech.

In the communication portion of the speech, Bernanke noted that it may be necessary for the Federal Reserve to begin to communicate that it will abandon some of its usual rules about when to raise interest rates and promise to keep rates lower for longer.

Some of the policy rules informing the forward guidance relate policy interest rates to familiar determinants, such as inflation and the output gap. But a number of considerations also argue for planning to keep rates low for a longer time than implied by policy rules developed during more normal periods. These considerations include the need to take out insurance against the realization of downside risks, which are particularly difficult to manage when rates are close to their effective lower bound; the possibility that, because of various unusual headwinds slowing the recovery, the economy needs more policy support than usual at this stage of the cycle; and the need to compensate for limits to policy accommodation resulting from the lower bound on rates.

In other words, Bernanke is saying that the Fed may have to promise to behave differently than it has in the past – in order to convince markets that rates will remain low even if the economy begins to recover.

Bernanke, at least, seems to believe that the Fed’s words are also sticks. And when the economic situation becomes dire, the word-sticks need to get bigger.

Given this emphasis on communications, it seems very likely that there will be some dramatic changes to the Fed’s statement coming out of the next meeting.

– by CNBC.com senior editor John Carney

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Eurozone will pay ‘terrible price’: Jim Rogers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A “terrible price” will be paid for the euro zone crisis eventually, whether the European Central Bank (ECB) embarks on mass bond purchases or not, Jim Rogers, investor and co-founder of the Quantum Fund with George Soros, told CNBC Monday.

Rogers said: “These guys have been saying the same old garbage for a long time. It’s not a game-changer – it’s good for the market for maybe a month. The debt keeps going higher and higher and eventually we’ll all going to pay a terrible price.”

He warned that the market rally, which many have seen as an opportunity to get back into riskier assets, would only be a short-term rebound.

“It’s not an opportunity to make money for me. This is not good for the market and it’s not going to last. Every three or four months they (euro zone politicians) have a summit and they say: Ok guys, everything is ok now. The market goes up. But we’re getting a little tired of this and the market is getting a little tired of this,” Rogers argued.

There should be some opportunity to make money in the short term, Peter Toogood, director of investment, Old Broad Street Research, said.

“There is a little window for risk trade – not a sustainable one, but there’s some stability to the short-term outlook,” he argued. He pointed out that ECB President Mario Draghi “has already been expanding the balance sheet through disguises.”

Some point out that the ECB will hold off on the bond-buying program – known as Outright Monetary Transactions (OMT) – which will raise its balance sheet, until there are much firmer conditions imposed. This makes it less like classic inflationary money printing.

Carl Weinberg, chief economist, High Frequency Economics, said that he doesn’t think the ECB will print money in Europe any time soon.

“We’re going to have the same old, same old all over again. It’s just another twist on the same old story, but right now they’re not doing anything,” he said.

“Draghi couldn’t get past the Germans for an inch if he didn’t agree to sterilize the proceeds.”

Opinion is also divided on how the potential to buy (rephrase?) huge tranches of the bonds of shakier economies, to try and keep their borrowing costs at sustainable levels, will affect the commodities markets.

Weinberg pointed out that the OMT plans are probably on too small a scale to affect the commodity markets long term. While they have been described as “unlimited”, countries which apply for the assistance have to meet certain conditions for their budget and fiscal reform.

Rogers, famed as a long-term commodities bull, said there was no reason to correct this stance.

“The bull market in commodities will end some day – but some day is a long way away,” he said.

“Commodities have been correcting for a while. Now everybody knows they’re throwing money into the market, and history tells you that when they do this the way to protect yourself is to own real assets whether it’s silver or rice. If the world economy gets better, I own commodities because there’s shortages developing. If it doesn’t they’re (central banks) all going to print money. It’s the wrong thing to do, but it’s all they know to do.”

RELATED LINKS

• Euro Zone Enters Dangerous Week Buoyed by ECB
  
• Is Caution the New Danger for Markets?

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Markets crave stimulus: Will the Fed give them their fix?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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New evidence of sluggish U.S. jobs growth and dovish tones from Federal Reserve officials have pumped up expectations that the central bank could announce a new easing program after its meeting Wednesday and Thursday.

The two-day Fed meeting is the big event in a week that includes some important economic data. Retail sales data Friday is likely to show consumers increased spending in August, but inflation data could show that some of what is being purchased is just higher priced gasoline.

In addition to easing from the Fed, traders are watching for other global stimulus that helped lift stocks in the past week. China, for instance, approved 60 infrastructure projects worth $157 billion, boosting global stocks and commodities Friday that could benefit from that spending.

Meanwhile, the European Central Bank’s announcement Thursday of a bond-purchase program aimed at lowering borrowing rates for cash-strapped countries helped give a lift to risk assets, and the focus now shifts to a German court ruling Wednesday on whether Europe’s ESM bailout fund is constitutional. (Read more: Is the ECB’s New Plan Too Late to Save Greece?)

The weak U.S. August employment report Friday raised the odds that the Fed could move sooner rather than later on a new asset purchase program, or QE3. Wall Street’s Fed watchers, including some who did not expect QE, now see the possibility of a new open-ended program the Fed would use to purchase a mix of Treasurys and mortgage-backed securities. (Read more: Market Sees ‘Helicopter Ben’ Coming to the Rescue)

Just 96,000 jobs were created in August. “I do think this makes it more clear to them that they may want to do more,” said Dean Maki, chief U.S. economist at Barclays. “The fact we’re in the middle of an election season is a mild detriment but at the end of the day, they’re going to do what’s best for the economy.” Republican presidential candidate Mitt Romney and his running mate, Rep. Paul Ryan, (R-Wis.) have said they see no need for more Fed easing, and some in the markets say the easing could be construed as helping President Obama.

While there is no clear consensus the Fed will act this Thursday or some time later in the fall, there is a fairly uniform expectation that the Fed will extend the time frame for which it intends to keep interest rates near zero from 2014 to mid-2015 or later.

“I think they will push out the rate guidance next week,” said Ward McCarthy, financial economist at Jefferies. “The big question is what they do with the balance sheet. There’s very little doubt in my mind that they’re headed toward an open-ended QE.” McCarthy said the Fed could be flexible, calibrating its activity to the economy’s performance. QE expands the Fed balance sheet, and in theory drives investors into riskier assets while keeping rates low.

Whither Stocks

Stocks in the past week had the best performance since June. The Dow [.DJIA  13306.64    14.64  (+0.11%)   ] was up 1.7 percent to 13,306, the highest level since Dec. 28, 2007. The S&P 500 [.SPX  1437.92    5.80  (+0.41%)   ] was up 2.2 percent for the week to 1437, the highest level since January, 2008, and the Nasdaq [COMP  3136.42    0.61  (+0.02%)   ] rose 2.3 percent to 3136, its best level since November, 2000.

Stocks had their best day of the week Thursday, after the ECB announcement. “After a huge day like yesterday, after a weak jobs report like we had, for the market to have a follow through like this, shows there’s demand for stocks,” said Scott Redler of T3Live.com, who trades the short term technicals. “Leading stocks continued to make new highs. The banks are up three days in a row, showing power.”

“I think we could pause in front of the Fed and digest a few days up here,” he said. Redler said he expects to see a lot of excitement around Apple [AAPL  680.44    4.17  (+0.62%)   ] in the coming week. The company is expected to announce its next generation i phone Wednesday. Redler, who owns Apple, says it could easily reach $700 a share based on the way it’s been trading. (Read more: Is Sept. 21 Really When the New iPhone Will Launch?)

Jack Ablin,CIO of Harris Private Bank said the market’s recent run has made him consider taking some profits, as his target for the year is 1450 on the S&P 500. “The closer we get the more tempted I am to watch the election with some dry powder,” he said.

“We normally like to stay in an extended market if there’s momentum,” he said. “For me to reduce risk is kind of running a little counter to our process … We threw a year-end target out there that we thought was reasonable and attainable. If we got there before year end, I’d rather, if I can, get my returns.”

There is concern the election season will become increasingly volatile for stocks, and the market could get slammed in the fourth quarter if Congress does not act to resolve the “fiscal cliff.” The fiscal cliff describes the hit the economy would take if Congress fails to stop the expiration of the Bush era tax cuts Dec. 31, or prevent a wave of automatic spending cuts that would take effect Jan. 1.

Binky Chadha, chief global strategist at Deutsche Bank, said he does not see that scenario as the most likely. Instead, the market may be acting as it historically has when a presidential election is a close call.

“I would say the election will play a role but it has not so far,” he said. “In all those close elections, what typically happens is the market is essentially flat September and October going into the election, and then you see a very robust five-percent increase between election day and year end.”

“We should get the typical five-percent pop,” he said. Chadha said the election could provide more “pop” if Republicans win the presidency or take control of the Senate from Democrats, as they are viewed as better for markets and could make clear moves to avoid the fiscal cliff.

Chadha said another plus for stocks is that the tail risk from Europe has lessened with the ECB action, and the stock market may now respond to the economic data, despite August’s poor jobs report. He said the market is already being helped by an increase in positive surprises in economic data.

In the past week, the data were mixed with improvement in jobless claims and the ISM nonmanufacturing survey (a gauge of the services sector), but weakness in the ISM manufacturing survey and the employment report. But the lowered forecasts from economists may now be easy for the economy to beat.

“We are actually at the cusp of getting positive surprises. What we’ve got so far is the less negative surprises,” he said. Stocks typically move in correlation with surprise indexes.

Econorama

Maki said he does not expect any of the data ahead of the Fed meeting to have a significant influence, but he is watching consumer-related sales and inflation data at the end of the week.

“What will be most interesting and most important for GDP will be the retail-sales report we got on Friday — and the CPI report is also Friday,” he said. “We believe CPI is going to show an 0.8 headline rise, which is going to be a kind of counterpoint to the (Fed) easing, when you get that kind of rise the next day. But that will be mostly gasoline which the Fed doesn’t focus on.” One criticism of QE is that it causes inflation, as investors buy commodities, and the dollar weakens.

Maki expects headline retail sales to show a 0.7 percent gain, in part from car sales and gasoline. Core should be up 0.3 percent. “We do believe consumer spending is picking up in the third quarter. We think GDP growth will as well,” he said. Maki expects 2 percent GDP for the second growth but it is tracking a little higher at 2.3 percent.

Even with low job growth, the consumer is showing signs of life. “We’re just not getting any liftoff. The unemployment rate has been stuck in the low 8-percent range,” he said. The unemployment rate fell in August to 8.1 percent from 8.3 percent but because more people dropped out of the workforce. “The Fed thinks the unemployment rate should be in the 5 to 5.5 percent range,” he said.

What to Watch in the Week Ahead

Monday

3:00 p.m. Consumer credit

Tuesday

7:30 a.m. NFIB small business survey

8:30 a.m. International trade

10:00 a.m. JOLTS

1:00 p.m. $32 billion 3-year note auction

Wednesday

Fed begins two-day meeting

German Court rules on ESM

8:30 a.m. Import prices

10:00 a.m. Wholesale trade

0100 p.m. $21 billion 10-year note auction

Thursday

8:30 a.m. Initial claims

8:30 a.m. PPI

12:30 p.m. FOMC statement

1:00 p.m. $13 billion 30-year bond auction

2:00 p.m. Fed economic forecast

2:00 p.m. Federal budget

2:15 p.m. Fed Chairman Bernanke press briefing

Friday

8:30 a.m. Retail sales

8:30 a.m. CPI

9:15 a.m. Industrial production

9:55 a.m. Consumer sentiment

10:00 a.m. Business inventories

Also read: What Will The Fed Do?

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold set for dramatic fall if central bankers disappoint

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The recent rally in gold, which touched a near six-month high this week, is unlikely to last, say commodity analysts, who forecast prices could fall 10% over the next month if central bank actions disappoint.

Trading close to key resistance level USD 1,700 an ounce, gold prices have had a bull run over the past one month, rising 5.5%, on expectations of monetary easing by both the US Federal Reserve and the European Central Bank (ECB).

But Warren Gilman, CEO of research firm CEF Holdings, says this rally has not been justified given the lack of clarity from policymakers in the West.

The ECB is scheduled to meet Thursday and the Fed next week, and Gilman warns that a sharp fall in gold prices could be coming very soon if the outcome of these central bank meetings disappoints.

“I’m expecting more rhetoric and little in the way of concrete action. The fall in gold could happen as quickly as this week, as we start to see Europe hasn’t been sorting itself out and the solution to solving the debt crisis is not near,” Gilman told CNBC.

Andrew Su, CEO of Sydney-based commodity brokerage Compass Markets, agrees that gold is vulnerable to a “dramatic” downturn as he believes the ECB is unlikely to provide any definitive plans in terms of its bond-buying program.

“We have significant resistance at USD 1,700 and have a lot of opportunity for market disappointment over the next couple of days,” Su said.

He adds that gold could hit USD 1,530, a key technical support level, and then even move below very quickly to USD 1,500. “We are looking to short gold at current levels,” he said.

Dhiren Sarin, Chief Technical Strategist,  Asia-Pacific at Barclays, says while he expects a temporary pullback in gold in the coming days given the “significance” of the psychological hurdle at the USD 1,700 level, he is ultimately looking for the precious metal to move higher.

“As long as gold stabilizes in the USD 1,625-1,640 area, we would view a pullback as a healthy development and set up for further gains,” Sarin said. 

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fed watching ECB just as closely as markets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Federal Reserve, which meets next week, will be watching Thursday’s European Central Bank (ECB) meeting just as closely as financial markets as it mulls whether or not to deliver a monetary boost to a fragile US economy.

ECB President Mario Draghi bought calm to volatile markets in late July when he pledged to take action to end a debt crisis in the euro zone. Now, with a long-summer break over, it is crunch time for the central bank to deliver and outline just how it plans to alleviate pressure on troubled euro zone member states that are struggling with high borrowing costs.

What the ECB says on Thursday is important to the Fed because any disappointing news could trigger a fresh bout of market volatility and uncertainty. That in turn could persuade the Fed to deliver monetary easing via quantitative easing at its September 12-13 meeting, especially if any bad news from Europe is followed by weak US jobs data, says Jim Awad, Managing Director at Zephyr Management in New York.

US jobs numbers are released on Friday and economists expect to see a rise of about 120,000 in August non-farm payrolls.

“The case for waiting (on monetary stimulus) for the Fed, is that the U.S. economy is still growing and markets still believe that in the short-term, Europe will get its act together and buy bonds,” Awad told CNBC Asia’s “Squawk Box”  on Wednesday, referring to expectations that the ECB will unveil plans to buy the bonds of troubled euro zone members.

“So, if we get non-farm payrolls at 125,000 or more, (Federal Reserve Chairman Ben) Bernanke is likely to wait and save room for an emergency. But if Thursday in Europe is disappointing and the payrolls come in below 125,000, I think Bernanke will go next week,” he added.

The Federal Reserve has kept interest rates near zero since 2008. It has also conducted two rounds of quantitative easing (QE) to lower long-term borrowing costs and promote investment and growth. It is a third round of quantitative easing or QE that investors are now anticipating.

Weak economic data on Tuesday appeared to support the case of further monetary stimulus, with a survey from the Institute of Supply Management showing US manufacturing contracted at its sharpest rate in more than three years in August.

In Europe, meanwhile, caution in the run-up to the ECB meeting has taken the edge off a rally in equity markets, which closed lower on Tuesday.

Some analysts say decisive action from the ECB this week would ease pressure on the Fed to act to stimulate growth, especially since the US central bank may prefer to wait until after the November US presidential election is over before releasing any further monetary stimulus.

“We are entering into a strange couple of months because the ability of the Fed to take up much of the slack seems to be quite limited on the basis that they will be quite reluctant to make any major moves ahead of the election, on fear of appearing too partisan,” Stephen Davies, CEO at Javelin Wealth Management told Squawk Box.

“So the emphasis will be on the ECB again to try and suppress yields on some of the peripheral euro zone countries, which may mean a reactivation of the bond-buying program,” Davies said.

“But the stories we have coming out of northern Europe in terms of ongoing opposition to those programs is quite strong, so that leads to further uncertainty and uncertainty is never very good for financial markets,” he added. German officials in particular have in recent weeks raised opposition to the possible buying of government bonds by the ECB.

– By CNBC’s Dhara Ranasinghe

RELATED LINKS

    Pressure Mounts on ECB
    Devil in the Detail
    Caution the New Danger For Markets?

© 2012 CNBC.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

As markets await ECB, the devil is in detail

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Just two days to a key meeting of the European Central Bank (ECB) and markets already appear to be lapping up hints of what the ECB might do to alleviate pressure on struggling members of the euro zone.

The euro received a boost overnight, and held onto the gains in Asia trade Tuesday, after ECB chief Mario Draghi was reported to have told a closed hearing of the European Parliament that the central bank could buy government bonds with maturities of up to three-years from euro zone countries such as Spain that have been grappling with high borrowing costs.

The ECB meets on Thursday against a backdrop of heightened expectations that it will now take decisive steps to end a debt crisis in the region and restore confidence in the beleaguered euro.

While the idea of the central bank stepping into buys bonds from troubled euro member states is not new, details of the kind of bonds it will buy is and the suggestion that the ECB will buy debt with a short duration is a positive sign, analysts tell CNBC.

“I think focusing on the shorter-end of the yield curve is the way to go,” said Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital in Sydney.

“If the ECB buys bonds of up to three-years then it’s sending a signal to countries like Spain that if we (the ECB) buy your debt, we’ll only do it for three years and after that you have to get your act together, I think that is reasonable,” Oliver told CNBC Asia’s Squawk Box on Tuesday.

“If they finance them for 10-years that’s a different matter; that relieves the pressure on Spain a bit too much,” he added.

Expectations of concerted action from the ECB have helped underpin equity markets, push down debt yields in Europe and boost the euro [EUR= 1.2607    0.0014  (+0.11%) ] , which nudged above USD 1.26 overnight and has gained about 4.5 percent since Draghi pledged in late July to do whatever it takes to save the euro area from collapse.

“We have seen a bit of a bounce in the euro after the comments were leaked that Mario Draghi is considering buying bonds out to a three-year maturity. That was nice and specific, so we liked that and equities went higher as well,” said Sean Callow, Senior Currency Strategist at Westpac Bank in Sydney.

“So there’s no doubt that markets are expecting a positive outcome from the ECB and an in-principal agreement that the ECB does stand by to buy bonds, if the countries in question ask for help and jump through various hoops,” Callow said.

Analysts appeared confident that ECB would not disappoint markets.

Also read: Moody’s Changes Euro Zone Rating Outlook to ‘Negative’

“Hopefully they have got a good package together and we will see that at the end of the week,” Stephen Nash, Head of Strategy and Market Development at FIIG Securities told Squawk Box.

Certainly, more negative news for Europe on Tuesday appeared to be brushed aside as markets focused on the outcome of the ECB meeting. Credit ratings agency Moody’s said it has changed its outlook on the European Union’s Aaa rating to negative to reflect the negative outlook on the ratings of the EU’s big budget contributors – German, France, the UK and the Netherlands.

Analysts said that with optimism running high in financial markets, investors would continue to focus on the details of potential ECB bond-buying plans.

“He (Draghi) would really have to deliver an absolute clunker to disappoint markets,” said Callow.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rates May Stay Low Through 2015: Fed’s Williams

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A top Federal Reserve policymaker told CNBC that interest rates may remain at rock-bottom levels for at least three more years and that more easing might be needed to combat high US unemployment and sluggish economic growth.

San Francisco Fed President John Williams, in an interview from Jackson Hole, Wyo., said he was “concerned that we could be stalling at the current high level of unemployment.”

As a result, more bond-buying from the Fed in the form of quantitative easing (learn more) might help, he added. (Read more: What Do Markets Expect From Jackson Hole?)

“Witout further accommodation I see the unemployment rate staying right around where it is now…at least for another year and a half,” said Williams, who is a permanent voting member on the Fed’s Open Market Committee (learn more). He also stated he could see rates remaining at zero until 2015.

“Given our mandated goals…I  think the extra or additional monetary accommodation would be very useful to help boost the economy, speed the recovery along somewhat, and help get employment toward its full employkment goal over the next few years,” he added.

Williams’ remarks come hours before a highly anticipated speech by Fed Chairman Ben Bernanke, and amid a pitched debate about whether more stimulus would really help boost the economy.

On Thursday, Atlanta Fed President said that more quantitative easing was “a close call” given the weakness of both labor markets and economic activity.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow