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Week Ahead: more ‘rearranging deck chairs on the Titanic’?
Still reeling from a sell-off in equities over global growth and debt fears, investors will turn to policymakers for answers.
Still reeling from a sell-off in equities spurred by fears over global growth and debt, investors will next week focus on efforts by policymakers to prop up the world economy and resolve Europe’s fiscal crisis.
Markets are approaching a stage when central bankers will start to panic, according to Trevor Greetham, asset allocation director at Fidelity. ‘And there’s an old adage that when central bankers start to panic, the markets can stop panicking,’ he added.
Greetham’s comments came after the Federal Reserve warned of ‘significant downside risks’ to the US economic outlook, as it unveiled a new stimulus measure whereby it buys long-dated US debt funded by selling short-term paper. In the wake of the statement, global stock markets slumped.
Cash for Greece
‘To some people, I think, that’s a bit like rearranging deck chairs on the Titanic,’ the Fidelity director said of the stimulus. ‘They want more money printed, and with commodity prices dropping, my guess is that they’ll get it sooner rather than later.’
Meanwhile, as many as eight countries may approve changes to the eurozone’s bailout fund next week – offering a catalyst for ‘modest improvement’ in markets, said Michala Marcussen, global head of economics at Société Générale.
But she added that the suspense over whether Greece receives the next €8 billion (£7 billion) chunk of bailout cash was unlikely to be ended before a meeting of eurozone finance ministers on 3 October.
And analysts at Royal Bank of Scotland pointed out that Europe’s banks were likely to remain under pressure amid mounting fears over their exposure to eurozone debt, warning in a note of a ‘risk of widespread equity issuance’.
US growth figures
Investors will also scrutinise a slew of US economic reports for clues as to whether the world’s biggest economy is slipping back into recession. Monday will see figures on new US home sales, while data on consumer confidence is due on Tuesday, to be followed by a report on durable goods orders on Wednesday and US gross domestic product on Thursday.
‘The data are expected to show the US economy barely growing, with the consumer sector and housing markets under particular pressure,’ noted Chris Williamson, chief economist at Markit.
In Britain, figures on retail sales are due on Tuesday, while reports on consumer borrowing and mortgage approvals are to be published on Thursday.
The week will also see a modest number of company announcements.
Domino’s Pizza and software firm Misys (MSY.L) are set to publish interim management statements on Wednesday, when Man Group (EMG.L), the world’s biggest listed hedge fund manager, is to make a trading announcement.
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