US markets close flat as no hints on QE3

Federal Reserve Chairman Ben Bernanke is in wait and watch mode as there was no explicit signal of quantitative easing 3 (QE3) on Thursday.

He says, “Fed remains ready to act if financial stresses escalate.” According to him, Europe poses a significant risk to the recovery in the US.
 
Fitch downgraded Spain by 3 notches to BBB from A, which is negative outlook

Fitch says, Spain’s ability to intervene decisively in banking sector has been constrained, it will need external support.

Spain debt auction was smooth. Country raised euro 2.07 billion as against target of euro 2 billion. Yields were higher but manageable.

Germany chancellor Angela Merkel says, ready to act in case of crisis but a clear breakthrough at EU summit is unlikely

**China cuts benchmark lending rates by 25 basis points across all tenors

Deposit rates cut by 10-40 bps varying on tenors

It was the first rate cut ever since December 2008; the People's Bank of China (PBOC) also increased flexibility in rate setting

Surprise moves by PBoC was positive but also raising fears of a negative surprise in economic data

**US Data: Initial jobless claims came in slightly better than expected at 3,77,000

US Consumer Credit went up USD 6.5 billion as against consensus of USD 12 billion addition  

US markets at close: Dow Jones rose 0.4% to 12,460.9 while S&P 500 Index was flat at around 1315 and Nasdaq fell 0.5%

EU markets at close: FTSE went up 1.1%; DAX rose 0.8% and CAC gained 0.4%

Asia today

Shanghai Composite was flat despite rate cut.

Hang Seng, Straits Times, Kospi and Taiwan Weighted were down 0.5-0.8%

Nikkei fell 2% due to fall in current account surplus.

SGX Nifty slipped 0.4% to 5,004

Currencies

Ben Bernanke comments supported US dollar yesterday

Dollar index is now at 82.43 as against yesterday's low of 81.91

Euro is on the back foot on Spain and dollar strength

Euro is currently at 1.252 to the dollar today as against high of 1.262 yesterday

Yen is approaching 80 to the dollar again

Commodities

Bernanke statements weighed on commodities, particularly gold.

Gold is now at USD 1585 an ounce as against high of above USD 1630 an ounce. It lost 2% yesterday

LME Copper gained 1.1% yesterday post China, but now it is down over 1.5% post Bernanke

Brent crude fell 1.5% today at USD 98.3 a barrel after 70 cents decline yesterday

WTI crude declined 2.5% now below USD 83 a barrel

What to watch out for

German Trade Data, WPI

Italy Industrial Output

US Trade Balances, Wholesale inventories