- Asia mostly red: Nikkei +.16%, China -1.75%, HK -.41%, SoKo -.10%
- Japanese home purchases jump as Japan prepares consumption tax rise
- Chinese stocks tumble as Chinese companies report weaker profits
- Europe flat: Eurostoxx -.12%, Dax +.03%, FTSE closed
- EC CDS unchanged across the board in quiet trading
- Germany import prices +1.2% YoY vs +1.4% expected, +1.3% previous
- Germany IFO current assessment 111.2 vs 110.8 expected, 111.5 previous
- Germany IFO expectations 94.2 vs 95.0 expected, 95.5 previous
- German and French finance ministers meet in Berlin to discuss crisis
Markets are at the day's highs, albeit in narrow ranges, as weak Chinese stocks and disappointing IFO expectations have been trumped by anticipation of Bernanke's Friday "state of the stimulus" Jackson Hole address. Market participants are replete with memories of his speech two years ago, the trigger of a 20%-plus QE2 rally, and it is likely that Bernanke will deliver yet more assurances that further stimulus is on the way. But investors looking for a repeat of 2010 will likely be disappointed, since we've already had a 12% rally from May lows, and since the appetite--and need--for huge easing measures just isn't there.
Bernanke also has an election to worry about, and with the identity his future boss very much up in the air, he can't be seen doing anything to favor one camp over the other. Better to dangle the expectations of further goodies than to actually deliver them, and so far markets haven't seemed to mind. He can hardly get into trouble just talking about stimulus, and my bet is that's what he'll do.
What will the markets do? I have no idea on that one, but my best guess is, "not much." Certainly that's what the VIX is telling us we'll get.