Focus shifts from US to Europe

As another annual Jackson Hole Symposium draws to an end we still do not see any conclusion to the raging Eurozone crisis. However, after initially disappointing the markets, Fed Chairman Ben Barnanke, did hint that further “unconventional Monetary Stimulus” could be on the cards as unemployment and price stability weigh on the US economy. QE3 is predicated, by many investors, to be announced at the September Federal Reserve meeting on the 12-13 of September, although more disappointment could be imminent if the reserve decide to go wait for the outcome of the US Presidential election.

Europe and more specifically the ECB are now under the microscope of markets with many expecting Mario Draghi to come to the rescue of the markets with a proposed bond buying plan and potentially a ceiling for the acceptable level government bond yields can reach within the Eurozone which would put the bank on the line to potentially buy unlimited quantities of bonds. It is also possible the ECB slash rates again down by 25 basis points to .50% as assign the bank are trying every means possible to restore confidence and prevent borrowed funds being parked at the ECB rather then being lent to the ‘real economy’.

UK manufacturing PMI data out this morning is expected to show another month of contraction for the industry, in what was originally seen by the coalition to be the way out of the recession. We have the UK Interest rate decision out this week on Thursday. Rates are expected to be kept on hold with further QE being considered by some members and the current sentiment is for more QE in November unless economic data improves.

Expect a choppy week with a heavy data and political calendar to keep things interesting with Manufacturing from UK, Europe and US, interest rate decisions from BoE and ECB with the week being capped off with US Non-farm payrolls.

Ashley Skinner