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QE3 'Jawboning' Moving Markets

ByNicholas Santiago
Published 08/23/2012, 10:10 AM
Updated 07/09/2023, 06:31 AM

This morning, the S&P 500 Index e-mini futures (ES-U2) are trading lower by 3.50 points to 1408.75 per contract. Traders and investors seem to be retreating after hearing yesterday's FOMC minutes which all but guaranteed QE-3 was on the horizon. As you may have noticed, the markets soared higher after the FOMC minutes were released yesterday afternoon. Today, that sugar high looks to be wearing off. Just think about it, if the Federal Reserve implemented another quantitative easing program at this time gasoline, oil, and food prices could soar sharply higher from current levels. Has anyone looked at the price of corn lately?

Asian Markets
Last night, all of the major Asian stock indexes were higher. The Hang Seng Index (Hong Kong) was the big winner trading higher by 1.23 percent. It seems that the Hang Seng follows the Dow Jones Industrial Average very closely. The one important stock index in Asia that struggled to trade higher was the Shanghai Index (China) which ended higher by just 0.25%. It seems that Chinese manufacturing declined again in August posting a flash PMI reading of 47.8. A reading below 50.0 indicates contraction. Last month's flash PMI reading was 49.3, so we can see the manufacturing decline is getting worse.

Traders must look for weakness in the Chinese ADR's if the U.S. markets are soft today. Leading Chinese equities such as Baidu.com Inc. (ADR) (NASDAQ: BIDU), SINA Corp (NASDAQ: SINA), Sohu.com Inc. (NASDAQ: SOHU) and China Mobile Ltd. (ADR) (NYSE: CHL) could all be volatile today.

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