In the past 24 hours, there has been a tug of war between negative macro forces and pleasing economic data points.
It was always going to be the way that despite improving sentiment from US consumers, the top-down forces would win the battle; and in the absence of any fresh catalysts to buy, the bears would have the upper hand.
Fed member Charles Plosser’s comments that QE won’t boost growth were largely known, but it serves as a timely reminder that the Fed has its back against the wall and will clearly need the assistance of governments if it is going to really reach its potential nominal growth and employment targets.
ECB member Mr Asmussen seemingly also had a hand in damaging sentiment, saying the bank won’t take part in any debt restructuring. Again, did we really expect anything different from an ECB member. There would clearly have to be a rather lengthy consultation process before the ECB writes off a chunk on bond holdings of any nation’s debt it holds on its balance sheet.
Of course then any mention of Spain either through the public protests or the reputational damage from an ever-evolving regional situation seems to have traders pushing the sell button on risk assets.
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