Asian stocks were trading close to a four months high when global markets Monday morning started to digest the US Federal Reserve, FEDs, decision. FED is going to buy bonds for USD 40 Billion monthly for as long as it takes to see growth and an increase in US-employment. Gold, oil and copper prices continue to rally on hopes that fresh stimulus from both FED and the European Central bank shall boost the global economy. FED’s decision imply printing dollars and inflationary pressure. These measures shall play up to riskier assets and boost stocks and precious metals as gold and silver.
The Euro/USD at 1.3128 is consolidating after strong gains last week. The Euro has fallen from its 1.3169 peak on Friday and after a steady climb from 1.2042 only some weeks ago, the Euro might be in for a technical correction as we have seen with USD/JPY over the last two trading days. The Tokyo markets are closed for holidays.
Oil prices are still trading up helped by stimulus and increased tension in the whole Middle East. Israel is continuing its saber rattling against Iran with the Israeli Premier trying to make a possible strike against Iran a key element of the US elections. Brent is at 117 and NYMEX is trading on 99. Gold is 1776. The expected flow of dollars pumped into the market has already weighed in on the US dollar.
One of the favorite Wall street stimulus wags have lately been to compare the Federal Reserve with a rehabilitation clinic offering addicted investors a synthetic high. For each stimulus you need more to get the same high. The euphoria is followed by a crashing comedown. The markets have experienced new highs over the last days. But the blue Monday is lingering around the corner, when markets try to settle and are back to fundamentals and economic realities.
The Chinese government has announced that presentation of a new five year plan is imminent. The new plan might imply the full convergence of the Chinese Yuan as the US government has pushed for the last years.
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