The key of the day in the U.S. and the sign of European stock exchanges in the coming sessions will be marked by the meeting of central bankers in Jackson Hole.
Bernanke's appearance is particularly relevant because in the last year's meeting that the Fed implicitly announced would begin the QE2. In a scenario like the present, defined by the economic downturn, the difficulties in reducing unemployment and substantial losses of WAS in recent weeks, the Fed may consider launching a new round of quantitative easing, or at least communicate that you're willing to take some modest measure of monetary policy to help contain the current uncertainty.
The Fed will need a very strong argument to start the QE3. While data growth, unemployment and housing have been disappointing in recent times, we believe the Fed will have to wait a much worse, before embarking on another long season of quantitative easing.
You could say we have not seen much positive impact on real economic recovery of the first two programs of quantitative easing - in fact, the most dramatic effect has been exaggerated rebound in global stock markets.
On the other hand, the three rating agencies took the opportunity yesterday to claim the credit rating of AAA from Germany, but fears over the euro zone debt and the potential spread of the growth problem in Germany, still seem to worry the fragile market. A number of European countries (including France and Spain) has announced that the ban on short selling of financial stocks will last until late September. But despite this measure to stabilize the markets, risk appetite is still declining, and most European stock markets are operating in red today.
