Global shares markets exhibited an overall 5-year highs as markets breathed a heave of relief due to extensive Federal Reserve money printing under Janet Yellen. She is also about to take the responsibility of the US Central Bank from 2014. Following a press meet where Yellen confirmed that she has the nomination to be the first woman leading the Fed, the world equities market displayed a significant hike. She confirmed that the focus of the Fed would be in boosting hiring, which is ‘imperative’ in leading the country to a stable economic recovery. This confirmation sent out the right signals to the right quarters, improving investor confidence, and noting a five-year high.
Fund managers found relief as there was no mention of scaling back the $ 85 billion stimulus program every month, called the QE or the Quantitative Easing Program. The QE has been fueling rich gains in risk assets like equities and traders are anticipating that this is likely to continue until the next year. Relying on their newfound confidence, equity managers stepped up their trading to obtain record figures. Ingenious Asset Management Chief Strategist, Peter Clark, explained, “ We have been worrying about tapering QE and a relatively dull market with central banks lacking stimulus.” Explaining his positions, Clark described that Ingenious has maximum equities exposure with a bulk of it in defensive stocks. The company also curtailed its bond allocation rate over uncertain interest rates.
However, the equities market had its own share of issues to handle. Although the Japanese market led investments with a significant 7.6% gain, the Eurozone economy continued to show signs of deep stagnation. Traders noted that a fizzling out recovery for France and slow growth for Germany affected the third quarter of the Eurozone adversely, furether deepening the stagnation. The fears of acute deflation and corporate distrust on the strength of the Eurozone economic system were among the reasons for concerns among European traders. Without the possibility of expected growth, the valuations of European equity looked significantly stretched. The shares in the European market were only able to be up by 0.2 percent. The last ten days have been particularly busy in game changing as the European Central Bank decreed an unexpected rate cut amid open talks on initiating Fed style purchasing of assets.
William O’Donnell, the chief federal bond strategist at RBS Securities explained, “Yellen believes that the QE benefits would balance out the huge expenditure. This offered a strong confidence among managers who sees this as a valuable opportunity for a lifeline in a tumultuous market. The Fed appears to be doing a good job in convincing market dynamics that there would be little or no increase in the borrowing interest rates in the coming months. The last couple of days noticed a deep impact of this conviction on Eurodollar futures through rapid rallying that indicates the cost of borrowing would remain to a near zero figure until 2016. Since the Fed directly links its financial policies on the rate of employment, an impetus on hiring sent out the message that the institution would continue its financial aids in good tides.