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Bernanke’s U-turn on QE3 drives markets lower ? Latest Market Analysis

It was another see-saw day on equity markets as investors digested a raft of economic developments, data and policy hints. Generally though the sentiment was on the weak side and European markets failed to break in to positive territory at any point during the day.

Overnight, credit rating agency Moody’s hinted at a possible downgrade of the US’s AAA rating and this lead to a sharp sell-off of approximately 1% at the open. Markets then bounced around from then on, recovering on news that Italy had auctioned off treasury notes successfully, falling again on the discovery the auction was at a record premium and then recovering again as US jobless claims were better than expected.

Just as it looked like the market had avoided too much pain, Federal Reserve Chairman Ben Bernanke stated there were no current plans in place for further monetary stimulus, despite hinting at it just the previous day. Markets around Europe and in the US were sold down sharply on the news, the FTSE 100 losing over 50 points in the last 90 minutes of the day to close 59.5 lower at 5847.

Assets such as Gold, Silver and Oil, which had risen the previous day and again during early trading on QE3 expectations, all gave back most of their gains.

Shares in bakery group Greggs were unchanged despite a downgrade to ‘neutral’ by investment bank Goldman Sachs. The broker cited recent out-performance of the share price, up by 20% for the year to date versus a flat FTSE 100, for its change in view. Greggs ended the day at 535p.

Not performing so well though, were shares in the house builder Barratt Developments. In a trading statement the group announced improved margins, but unit sales and average selling prices were lower than market analysts had expected. Shares ended the day 5.3p lower at 105.9p.

This was posted in Bdaily's Members' News section by John Dance .