European Closing Thoughts 01/08/12

Federal Reserve chairman Ben Bernanke is about to take the stage.

In the meantime:

In US:

The ISM factory index was 49.8 last month, a bit higher than the three year low reading of 49.7 recorded in June; showing that the economy is still in contraction mode. Economists surveyed by Bloomberg News projected a reading of 50.2.The new orders measure came at 48 after a 47.8 reading, which was the weakest since April 2009 according to Bloomberg.The ISM's US production index was little changed at 51.3 versus 51 recorded in June. The inventory component increased to 49 from 44, the biggest gain in a year.

In UK:

Manufacturing shrank last month by the most in three years: an index output based on a survey by Markit Economics and the Chartered Institute of Purchasing Supply fell to 45.4 from a revised 48.4 in June, Markit said.

In Europe:

Euro-area manufacturing contracted for a 12th month in July, according to a separate report today. A gauge of manufacturing in the 17-nation region fell to a 37-month low of 44 from 45.1 in June.

In China:

A measure of manufacturing dropped in July to an eight-month low. The Purchasing Managers' Index eased to 50.1 in July from 50.2 a month earlier, according to the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing. (In today's Morning Meeting we talked about the matter).

The purpose of this list was to aggregate all readings to have a clear temperature of the economy. The conclusion is easy to find: economy is cooling world wide. You knew it already.

• My question is: Are these numbers “bad” enough to push central banks to act together??

Our reasoning is leading us to the conclusion that the answer is no.  It looks like there are just few bullets left, therefore prior to sacrifice one bullet you wait for the situation to turn for the worse.

Expectations are for the Fed to show that it's ready to act against weakening US economy. The central bank could push back its guidance for when it sees the need for an eventual rate hike into 2015 versus actual 2014. Will it be enough for the market? our answer is no. The street is for another round of Fed bond purchases, but “analysts believe policymakers will wait until at least September, giving them more time to lay out the case for their preferred method for easing policy in speeches between now and then”.Reuters reports.

What about the ECB: probability to the ECB launching a new purchase programme tomorrow has been set around 60% by a well known investment bank. Therefore there is a 40% chance of disappointment. They say.

By the way have you asked to yourself: and if mr Draghi ment something different from what the market thought?

I leave you thinking with the market picture at European cash close:

DJIA was up 0.25% to 13,041.70, the S&P 500 gained 0.11%, in Europe Stoxx 50 rose 0.20% while German Dax fell 0.41% to 6,744.53. The Eur was stable versus the greenback holding the 1.2300$ mark, Gold fell 0.56% to 1,605.60$ as some investors took profits on their longs, Oil(Wti) rose 0.59% to 88.58$. Yields in Italy  fell 2.53% to 5.929 while in Spain were down 0.25% to 6.732.

“The river is the last crucial element to your Holdem Poker hand. It's the last possible chance you are going to get that card you need to improve your hand and take the nuts. Likewise, it is the last time the board could deal a striking blow to your hand.” (Thanks to http://mytexasholdempokertips.com)

Have a pleasant evening.

Originally posted at www.77sigmatrading.com