Big Week Ahead Has Markets Playing Waiting Game Today; German and U.S. Bonds Hit Multi-Month Highs; Emerging Markets Sinking Like a BRIC
Big Week Ahead Has Markets Playing Waiting Game Today (AP)
With the United States Federal Reserve set to deliver minutes from its meeting later this week, and a host of other key data due as well, today’s trading session gives off that “calm before the storm vibe.” In addition to hearing whether or not the Fed will begin to taper its $85 billion a month stimulus plan, investors this week will also get U.S. housing data and hear from global central bankers, who are meeting in Jackson Hole, Wyo., this week. By week’s end, investors will have a much clearer picture of how the markets could shake out before year’s end.
German and U.S. Bonds Hit Multi-Month Highs (Reuters)
With the United States expected to enact its stimulus reduction next month, yields for both German and American bonds rose to 17-month highs. Germany’s 10-year government bond yields rose 1.3 basis points to 1.89 percent, their highest yield since March 2012, while similar length U.S. bonds rose to a two-year high of 2.87 percent. ABN Amro economist Nick Kounis sees the situation as an us-versus-them mentality, “What you are seeing at the moment in a way is central bankers versus the markets. The markets are pushing up the rate (increase) expectations and central bankers have been trying to pour cold water on the moves…”Again, by week’s end, we should have a better idea of who’ll win the battle, and where our investments should go. Hang on!
Emerging Markets Sinking Like a BRIC (Bloomberg)
According to evidence compiled by Bloomberg, investors are showing a growing preference for U.S. stocks over emerging market investments. Specifically, $95 billion has been invested into exchange-traded funds focused on American equities this year, while developing nation plays saw a withdrawal of some $8.4 billion. In addition, Bloomberg’s measure of historical price swings shows that the U.S. market is the calmest it has been in more than six years, compared to shares from Brazil, Russia, Indian and China (BRIC). Looking ahead, the flow of funds into U.S. investments is expected to help offset the looming stimulus reduction plan. As an investor, it is probably a safer play to wait until the week’s end before deciding where to begin investing for the second half of the year.