US markets gain on stimulus hopes

By Gautam Broker, Research Analyst at CNBC-TV18

**Federal Reserve chairman Ben Bernanke keeps stimulus hope alive ahead of Jackson Hole Fed indicated a possibility of QE3 in letter to the chair of the House Oversight and Reform Committee. Bernanke writes “There is scope for further action by the Fed to ease financial conditions and strengthen the recovery.” “Because monetary policy operates with a lag, policy must necessarily be set in light of a forecast of future performance of the economy.” German Chancellor Angela Merkel, over the weekend, continues to support ECB stance. Merkel says "My plea is that everyone weigh their words very carefully; We are in a very decisive phase in combating the euro debt crisis."   Agency reports indicated of ECB plan to buy bonds, cap yields continues, but German Central Bank voices strong opposition. German Central Bank chief says “We should not underestimate the risk that central bank financing can become addictive like a drug.” "In democracies it is parliament and not central banks that should decide on such a comprehensive pooling of risks." US data was mixed on Friday; US durable goods orders went up 4.2% as against expectation of 2.5%, primarily led by aircraft orders. But orders ex-transportation stood at minus 0.4% as against forecast of 0.5%. Capital goods orders came in minus 3.4% as against expectations of minus 0.2%. US markets at close on Friday: Dow Jones gained 0.8% at 13,157.9 while S&P 500 Index rose 0.7% to 1,411.1. Nasdaq Composite was up 0.5%. Volumes were 30% lower than average. European markets at close: DAX went up 0.3% while CAC and FTSE were flat. Asia Today Shanghai was down 0.8% and Kospi declined 0.2%. Hang Seng and Straits Times were down 0.1%. Taiwan was flat while Nikkei gained 0.4%. Currencies Euro slipped below 1.25 to the US dollar intraday on Friday as against high of 1.259. Euro closed with a loss of 0.4% at 1.251 to the US dollar. Dollar Index went up despite QE3 talk. It hit a high of 81.71 on Friday, before closing with gain of 0.3% at 81.6. Commodities Crude was down on Friday, but recovered today on news of tropical storm. Brent crude fell 1.2% to USD 113.6 a barrel on Friday, which gained 1.5% at above USD 115 a barrel today WTI crude declined 0.1% to USD 96.1 a barrel on Friday, which rose 1.4% to USD 97.5 a barrel today. Storm Isaac is expected to hit Gulf of Mexico today, due to which a quarter of US production is at risk. Gold was the top gainer last week with 3.4% gains. It moved up 0.3%, inching closer to USD 1680 an ounce today               LME Copper was down 0.6% on Friday.  What to watch out for China Leading Index German Consumer Confidence Eurozone M3 US Case Shiller HPI US Consumer Confidence