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Markets hang out for ECB outcomes

15.23 AEST, Thursday 6 September 2012

Markets hang out for ECB outcomes
By Ben Taylor (Sales Trader, CMC Markets)

Our markets have remained poised for tonight’s ECB meeting to take its cues. Talk of the ECB buying unlimited amounts of distressed sovereign bonds has captured the markets attention today pushing a risk on theme.

The rumour mill has been running wild this week with Mario Draghi expected to announce an outline to help problematic Eurozone members. Consensus suggest that whilst we will hear more about a framework the detail may be lacking with the ESM’s primary market bond buying still to be decided on in next week’s court ruling. Talk of sterilisation also suggests offsetting sales of assets may imply that we don’t get the full guns blazing kick everyone is waiting for.

The recent dramatic moves in iron ore are claiming victims. Fortescue and BHP have reassessed projects as not viable in the current conditions. High steel inventories and falling Chinese demand are pushing investors to sell iron ore plays. The resignation of FMG company secretary and investor relations head Roderick Campbell has confirmed all is not well inside FMG who have also announced this week that up to 1000 jobs will be slashed.

The issue of lower commodity prices is building pace around the investment community. Investors are starting to realise the lucky country is now vulnerable. A disappointment in central bank supportive action could really push our dollar lower in the near term.

Bernanke’s talk last week also means that this Friday’s non-farm payroll numbers will be of particular importance. The US Fed views its labour market as a major concern, any additional fall off in jobs numbers is expected to be met with strong stimulus support.


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