Markets await Bernanke's decision to taper QE3: ETX Cap

Ahead of the Federal Open Market Committee (FOMC) meet on Wednesday, Mark Priest, ETX Capital feels the biggest concern for the market is the state of quantitative easing (QE). He says, markets are waiting for Federal Reserve chairman Bernake's decision on the tapering off QE3. 

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“The decisions by the Federal Reserve has kept the markets afloat even from bad news coming in from the employment sector and has been ignored simply because the QE is out there and people expect it to carry on. So, it is a signal that it might be slowing down and then markets will react to it,” he says in an interview to CNBC-TV18.
Meanwhile, Priest does not think, Fitch along with Moody's downgrading Slovenia's sovereign rating has been taken as badly by the markets as one would expect. “We are seeing several downgrades, the UK amongst them and the reaction actually has not been that negative. So, we are not expecting it to have much effect,” he adds. Below is the verbatim transcript of Mark Priest’s interview on CNBC-TV18 Q: What is the mood in Europe and what is the expectation of how European markets are likely to pan out over the next few days?
A: All eyes are going to be on the Federal Reserve on Wednesday, where we might get an idea of whether they are going to slowdown their bond purchases later on in the year and that seems to be underpinning these markets at the moment. Monday was a bit softer. The big concern is the state of the QE, because that has kept these markets at the 5-year high levels for the last few weeks. Q: Do you think the markets should worry about what Ben Bernanke will say? A lot of people believe that he will not rock the boat and the experience of QE1 and QE2, the kind of withdrawal that we had and its impact on the market should tell him that maybe even if he has to signal a withdrawal of QE3, that would not come in Wednesday’s meeting but later. What is your sense on that?
A: At some point they have to slowdown. The market is looking for maybe an indication of when that will happen. Anything that he says on the easing up of QE is going to have a big impact on the markets. It has kept these markets afloat even from bad news from the employment sector which has been ignored simply because the QE is out there and people expect QE to carry on. So, it is a signal that it might be slowing down and then markets will react to it. Q: What is the market currently pricing in by way of signaling? Is it pricing in that we will get the first hint from Ben Bernanke about the possibility of the bond buying program being tapered?
A: We had a little bit of a softer day in the Dow on Monday. European markets were a little bit unsteady. There has been no major reaction. If there is an announcement that is when we will see a move down, but people are still holding onto hope that QE will stick around for a while. Q: On Monday, Fitch along with Moody's downgraded Slovenia's sovereign rating suggesting that it will be the next European nation to seek an external aid. How worried is the market about this news?
A: It seems to have really slipped under the radar. I do not think it is being taken as badly as one would expect. We are seeing several downgrades, the UK amongst them and the reaction actually has not been that negative. So, we are not expecting it to have much effect.