Morning Meeting: The Bailout Bell

Good Morning.

Yesterday after the European cash close Ben Bernanke gained the stage defending the Federal Reserve’s unprecedented bond buying in his first comments since the Fed renewed the purchases last month.

In his speech Bernanke said the Fed will sustain record stimulus even after the expansion gains strength, and policy makers don’t expect the economy to remain weak through 2015. Using his own words:

Our concern is not really a recession. Our concern is that growth will continue but at a pace that’s insufficient to put people back to work.

The Fed’s third round of quantitative easing, announced Sept. 13, has no end date or fixed total amount, unlike the first two programs of bond buying. In the first, starting in 2008, the Fed bought $1.25 trillion of mortgage-backed securities, $175 billion of federal agency debt and $300 billion of Treasuries. In the second round, announced in November 2010, the Fed bought $600 billion of Treasuries.

U.S. jobs data due on Friday will offer the first glimpse into the state of the U.S. economy after the Fed embarked on the last round of stimulus last month. But markets look anemic in some way, doubts are rising on Fed’s move effectiveness to achieve its objectives.

Bernanke speech was echoed by the Australian Central Bank which in the morning delivered a surprise interest rate cut sending Asian markets higher. The Reserve Bank of Australia lowered the country’s official cash rate to 3.25%, from 3.5%, citing a slightly weaker growth outlook.

Australia’s S&P/ASX200 Index climbed 1.03% to 4,433.70, while South Korea’s Kospi added 0.23% and Japan Nikkei flirted with the flat line at  8,799.30 or 0.03% higher.

In the currency market: the Australian dollar slumped after the decision, and was buying $1.0314, as compared with $1.0369 a minutes before the announcement. The Euro edged 0.19% higher against the greenback to 1.2915$ as Reuters reported last night that Spain is ready to request a euro zone bailout for its public finances as early as next weekend.  Remember: Moody’s credit rating review is still awaited.

On the commodity side:

Spot gold rose 0.2 percent to $1,777.32 an ounce, after marking a high of $1,791.20 on Monday, its strongest level since mid-November on fund buying and possible central bank demand.

US crude  inched down 0.1 percent to $92.38 a barrel and Brent was little changed at $112.19. London copper eased 0.2 percent to $8,283.75 a metric ton.

The RBA kicks off a week of central bank policy decisions,with the European Central Bank, the Bank of England and the Bank of Japan following later this week, therefore keeping hopes in Central Banks’ safety net such us interest rates cut.

With Germany signaling Spain to hold off on bailout requests, Greece facing objection to some of the measures unveiled on Monday to pave the way for an international aid crucial to keep the country afloat, we got all the ingredients for a volatile day today; therefore write down your game plan and stake with it.

Have a great one.