Friday, November 05 2010
Markets have reacted positively to the announcement the Federal Reserve will buy US$600b in Government bonds to help stimulate the economy. Recent economic news has remained quite positive:
- US quarterly results have been healthy.
- Factory orders were up 2% for the month.
- Business productivity was up 1.9% for the quarter.
- Initial jobless claims remain stubbornly high and help to justify the need for the quant easing.
At this stage the market is front running the quantitative easing. It has not really begun as yet. We remain intrigued as to whether the easing has the desired effect of getting the US back to work and driving growth in that market. The market seems unconvinced but we are seeing an expectation the liquidity will continue to flow towards emerging markets, commodities and resources.
Any signs of improvement in US economics is likely to drive some rotation to US related companies.
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