Two economies that have huge deficits from the massive amount of fiscal stimulus, the UK and the US. Both now have had a 'bounce' in housing (from tax credits or stimulus driven). A relief rally (US/Asia markets) ensured on the 2nd Jun 2010 namely on housing (US/UK). The other subtle reason for market rallies is the central banks, working behind the scenes, to bail out the European banking sector (ECB now receiving $387.1billion USD from EU banks prior to the 2010/2011 write downs) and to rev up currency swaps, from the Brazilian central bank to the Japanese central bank or have been talking about a continued and extensive currency swaps. This could be the beginning of a massive wave of central bank intervention.
Will this flow into stocks? Hard to say, I am beginning to think the power of fiscal intervention/stimulus is having a more predominant role in rallying equities of late, than CB money printing. It all seems disproportionate and strange. But the market is dying to de-leverage, it was stopped on the 26th May 2010 (refer to Dow 10,000 breach). At his point the market is overpricing risk trades.
(note: thinning volumes)
No comments:
Post a Comment