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ISEQ higher-Bernanke speech today

Friday, August 31 09:06:48

The ISEQ is up this morning by 10 points to 3,140 as European markets turned positive following some earlier losses. All eyes are on Jackson Hole today for the Bernanke speech however Davy Stockbrokers have a negative view on the likely outcome:

Stock indices closed down yesterday. The Euro Stoxx 50 Pr fell 1.25pc, the FTSE 100 -0.4pc and the S and P500 -0.8pc. Disappointing macroeconomic data from Asian markets helped to dampen sentiment, and the European Commission's survey of economic sentiment fell even more sharply than expected, with consumer and business confidence readings falling to their lowest levels since mid-2009. So, household and business spending is likely to remain weak in the euro-area heading into Q4.

Sentiment was also hit by news that the Valencia region will require even more aid from central government, with Spanish bond yields rising by close to 10bps. One exception to the disappointing news has been the robust performance of German consumption, set against two consecutive falls in investment spending through the first two quarters of 2012. However, German retail sales data released this morning show a 0.9pc contraction in July. This unexpected fall is likely to raise fears that the broader decline in sentiment across the euro-area economy is finally holding back German consumer spending.

Markets are clearly focussed on Fed chairman Ben Bernanke's Jackson Hole speech. Investors had already been disappointed by ECB president Mario Draghi's decision not to attend this year's meeting, ruling out any announcement on potential ECB intervention in bond markets. And yesterday markets appeared to reconcile themselves to likelihood that chairman Bernanke is unlikely to signal a third round of quantitative easing. So just as in 2011, the Jackson Hole meetings seem unlikely to yield any signal of a material change in monetary policy according to Davy Stockbrokers.