Spreadex Market Analysis: Markets Continue To Rally

AM Analysis – “Asian shares traded higher throughout the night” – Max Cohen
Asian shares traded higher throughout the night after Federal Reserve chairman nominee Janet Yellen signalled stimulus will be maintained until the U.S. economy improves, boding well for the European open. Yellen’s comments last night made clear her view that record stimulus measures should only be tapered after a sustained recovery, encouraging bullish investors who fear that any reduction in stimulus will trigger a sell-off.

On a more sombre note, the European recovery has suffered a serious setback after both Germany and France released GDP data that missed forecasts. In fact, France saw their economy shrink by 0.1% in the three months through September. This comes after President Francois Hollande failed to revive corporate investment in the face of one of the world’s heaviest tax burdens.

The figures, which follow France’s exit from recession in the second quarter, underline the issues Hollande is confronting as he tries to revive Europe’s second-largest economy and reverse an increase in unemployment that’s at a 14-year high. German GDP rose 0.3% in the same period after rebounding in the second quarter from a winter-induced slowdown.

The German economy is returning to a more moderate pace of expansion, according to the Bundesbank. That may restrain the pace of expansion in the euro area as countries including Italy and the Netherlands struggle to emerge from a recession. Growth in the third quarter was driven exclusively by domestic demand, whilst investment in equipment and construction increased, and private and government consumption rose slightly.

PM Analysis – “Markets continue to rally” – Alex Conroy
With Janet Yellen’s confirmation hearing taking place on Capitol Hill the markets continue to rally after her statements regarding QE. Stating there is no set time at which tapering will occur, her belief that the US economy is performing far below where it should be, has led to bulls pushing the markets up. Yellen went on to state that until the economy shows more substantial signs of recovery she won’t risk the fragile recovery so far by tapering. The vigorous defence of QE by Janet Yellen should see equities finish strongly especially in the US as investors who may have been cautious about getting into equities just before tapering occurred, get the encouragement they need.

President Obama is scheduled to speak this evening concerning plans to potentially amend his health-care law. This comes after hundreds of thousands of Americans have had their health care policies cancelled. Expect volatility and a lot of partisan policies being pushed with Obamacare being one of the major sore points with the Republicans and a major contributor to the US government shutdown.

[The original articles by Spreadex can be found here.]

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