Morning Meeting: Is the Nerve Game at its zenith?

Good Morning.

As soon as comments by the Federal Reserve Bank of Philadelphia President Charles Plosser: that new bond buying announced by the Fed this month probably won't boost economic growth or hiring and may jeopardize the central bank's credibility, crushed the headline, US markets  extended losses into a fourth session; the S&P500 fell 15.30 points or 1.1% to 1,441.59 ending at two week low. The losses extended to all 10 of the S&P's major sectors, with technology and financials hardest hit.

It's worth to remember that Plosser's comments are not necessarily a surprise because he is one of the leading hawks on the Fed who have opposed Fed Chief Ben Bernanke's unconventional monetary policy.

If we add up Plosser comments to the fact that more than 900 companies in Japan's Topix Index traded ex-dividend today we got the following performances for Asian benchmarks:

Japan's Nikkei Stock Average tumbled 1.94% to 8,915.22, South Korea's Kospi down 0.59% to 1,979.41. Hong Kong's Hang Seng Index declined 0.89% to 20,510.67 while China Shanghai Composite declined 0.64% to 2,016.22.

The news that Chinese Central Bank will “fine tune” policy to cushion the economy against global risks while closely watching possible impact from global policy loosening, was unable to offer support to Asian equities benchmark. As per a Bloomberg report China's Central bank added a record 200 billion yuan to the financial system using reverse-repurchase agreements.

The People's Bank of China conducted 190 billion yuan of 28-day reverse repos and offered 100 billion yuan of 14-day contracts. That's the highest for a single day in data compiled by Bloomberg going back to 2004.

The common currency fell 0.19% versus the greenback to 1.2875$, near two weeks low, as investors were searching for safe heavens. Against the Japanese yen , the dollar edged down to ¥77.74, from ¥77.79 in late trading on Tuesday.

A further drop in Japanese stocks could fuel speculation about yen-weakening intervention by Japanese authorities to help shore up first-half book closing.

In the commodity space: Gold traded along the flat line at 1,765.20$ an ounce, while Oil turned lower after the dollar strengthened. Crude for November delivery declined 0.60% to 90.82$ a barrel.

In Europe, markets will closely watch Madrid's ability to control its finances. Mr. Rajoy said measures to be unveiled Thursday would also include the creation of an independent agency to monitor compliance with budget targets, new job-training programs and legislation to sweep away many onerous government regulations. (The Wall Street Journal reports).

On a full bailout, Mr. Rajoy said, “At the moment, I cannot tell you.” He said the government would need to determine whether conditions attached to the bailout are “reasonable.” Adding that if interest rates on Spain's debt were “too high for too long,” thus harming the economy and raising the government's debt burden, “I can assure you 100% that I would ask for this bailout.”

Therefore we are back to the Spanish Dilemma: To ask for a full bailout or not to ask. The nerve game is reaching its zenith.

Today's German bund auction will test investors risk appetite, therefore keep an eye on this valuable information.

It's time to work on our daily plan.

Have a great day.

Originally posted at www.77sigmatrading.com