Countermovement on the Stock Markets – What is the Fed doing? – OECD Report

The euro opened against the USD at 1.1719 (6:30 AM) today, after hitting the lowest price in the last 24 hours of trading at 1.1715 in US trading. USD stands at 109.47 against the JPY.

As a result, EUR-JPY is trading at 128.29. EUR-CHF is oscillating at 1.08372.

After the losses of the previous days, there was a countermovement on the markets yesterday. More and more analysts said that there had to be state intervention in China, otherwise the situation could escalate. Indeed, the Chinese authorities seem to be restructuring the group. However, the new political line towards large corporations (including Tencent, Alibaba) does not speak in favor of a market-friendly variant. We therefore initially rate the counter-movement as precisely such. A decision on the direction or trend reversal for the markets cannot yet be derived from this. From a technical point of view, the situation would improve significantly from 15,500 points. If, on the other hand, the DAX falls below the 15,040 point mark, we switch our stock market light to “yellow”.

Waiting for the Fed

In addition to news from China, the monetary policy decisions of the Federal Reserve are awaited today. It is expected that the FED will clarify when it will formally announce the start of tapering, i.e. the reduction of expansionary monetary policy measures. At the same time, it is unclear whether and how the Fed will comment on interest rate hikes in the future. The majority of the analysts expect the formal announcement of the tapering in November. This would fit in with the fact that the FED is first moving forward and the ECB will follow suit with measures in December.

We see no reason to be nervous at this point, the US budget situation is precarious enough to prevent high interest rates in our own interests.

On the contrary, there is a keen interest in long-term negative real interest rates to reduce national debt. In Europe as well. That also means: don’t be afraid of interest rate hikes! These will be so moderate that the economy will not be harmed. The bias of monetary policy remains, preferring to be “a little” too expansive than too defensive.

In summary, a heartfelt “thank you” to all holders of government bonds with a high credit rating, who do not necessarily accept nominal, but real (!) Long-term losses in value by buying them and who finance our government spending.