Monday, 3 September 2012

Mike Lenhoff: Two action packed weeks for markets

China will likely be in focus this week
Two big weeks lie ahead for markets, which are likely to set the tone for the coming months. Aside from various central bank meetings (for the eurozone and the UK among them), this week’s economic news includes various purchasing managers’ surveys and culminates with Friday’s US Non-Farm Payrolls, which could set the stage for Fed action next week.

However, what markets are really waiting for is Thursday’s ECB meeting when detail on the operating framework for bond market intervention and, generally, for ‘repairing’ the transmission mechanism for effecting ECB monetary policy is to be announced. The Bundesbank has put up much resistance to ECB support for the bond markets, but there is no turning back for Mr. Draghi. The markets will judge Thursday’s delivery as a test of his and the ECB’s resolve to deal credibly with ‘whatever it takes’ to preserve the euro.       

China will likely be in focus this week too. More data comes out next week but the official purchasing managers’ survey for manufacturing in August was released this past weekend and came in below 50 for the first time since late last year. More > 

Mike Lenhoff
Chief Strategist

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