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Honest Information, Profitable Trading

Durudarshan - Investment Analysis

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The ECB's 25 basis point cut

Posted on November 8, 2013 at 3:42 AM Comments comments (6)
The announcement of the 0.25 percent cut in the European Central Bank's benchmark rate is an indication that the economic Recovery still needs a great stimulus, and this was EU's way of getting it.
 
Only the day before I read that Adecco, the temporary staff specialists, were seeing increased signs of hiring of staff, and European economies are showing a sign of strengthening Recovery.  It seems the services sector is growing, which is a good sign.  As more people are out and about and travel, they need to sit down and eat. 
 
The U.S. "shutdown" which at one point affected between 700,000 and 800,000 workers, who were told not to turn up for work and others who were furloughed  i.e. had their hours reduced to only attend at peak-demand times - that "shutdown" saw reduced demand in travelling and catering across the pond.  Here in London I have noticed a few cafes and restaurants mostly used by tourists close.  And that was the effect of just a lull in a few weeks of trading.
 
At the moment, although there is a positive buzz, the uncertainity of the debt ceiling raise pending for 7th February is bound to weigh down on sentiment.  It seems Senator Paul has indicated that Dr Janet Yellen will see confirmation of her nomination to the Federal Reserve's chairmanship, and the administration of the spigot can continue.
 
Feelings on this question are mixed, as the Chinese sources suggest that the U.S. is seeking about $561 Billion over the next six months.  This would equate to roughly $93.5 Billion a month.  That definitely suggests a phase of monetary expansion bigger than before, as the quantitative easing was running at some $85 Billion a month, cut by 1/12th with the Sequestration.  If the stimulus could be so increased,
then that would definitely improve the picture of Recovery for next year.  But in terms of reality, perhaps the $85 Billion a month will need to be restored, as suggested by Treasury Secretary Jacob Lew.  No one liked the Sequestration, with scholars being sent home due to non provision of a mid day meal, not to mention problems with funding necessary upgrades to fleets.
 
It is good news that housing in the U.S. registered positive gains in 44 States last month, and when a stable situation arrives after the debt ceiling issue is resolved, better gains may be expected. 
 
In the meantime, a stable and happy scenario is expected up to Christmas and New Year worldwide.
Chinese PMI data suggests a growing strength in the domestic re-focus as well as exporting sectors.
 
The United Kingdom is registering positive growth in housing numbers and GDP growth, greatly helped by the introduction of the Help to Buy scheme.  Hopefully speculators and buy-to-let landlords are not assisted so much that the property market may become a bubble, causing soaring rents, homelessness and reliance on the social welfare system. 
 
A mixed picture of optimism, with the Twitter IPO yesterday providing some amusement.  The market seems to manufacture some euphoria, with the underwriters making good profits.
 
That's it for now.  Very soon I'm off to the World Money Show, at the Queen Elizabeth Conference Centre not far from Big Ben.
 
Kind regards,
Duru-darshan.