Market Shock Is Coming! Sept 18: Taper Announcement & Berlusconi Decision!
Fed set to unveil tapering of asset purchases next week
(Reuters) – The U.S. Federal Reserve will announce next week it will trim its monthly spending on asset purchases by $10 billion – a smaller amount than previously expected – according to a Reuters poll of economists.
Italian Senate Panel may hold 1st vote on Berlusconi on Sept 18th
Italy Yields Rise Above Spain’s Amid Berlusconi Debate
Italian 10-year bond yields rose above those of Spain for the first time in 18 months amid speculation a vote on whether to expel Silvio Berlusconi from Italy’s Senate will destabilize the coalition government.
Spanish securities outperformed all but one of their euro-area counterparts, narrowing the additional yield investors demand to hold them instead of benchmark German bunds toward the least in more than two years. Bunds tumbled as Chinese economic data that exceeded analyst estimates and an easing of political tension related to Syria damped demand for the safest assets. Germany sold 910 million euros ($1.21 billion) of inflation-linked debt.
“The move has been driven by rising uncertainty with respect to the political situation in Italy,” Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA (UCG) in Milan, said of the yield spread with Spain’s bonds. “In the past we have seen Italian yields above Spanish in periods of tension. From a macro perspective there are no big changes between Spain and Italy. Both have seen improving data.”
The Calm Before The Storm
September promises to be a volatile month. The business world is returning from its summer doldrums and the markets are starting to pick up again. The Federal Open Market Committee are expected to make there big announcement at this month’s meeting (to taper or not to taper, that is the question).
The Syria crisis, although temporarily delayed, is by no means over yet. And economic crises continue to simmer in Europe, India, China and elsewhere, with any number of events threatening to send them over the cliff.
But for the time being, it seems we have entered a reprieve. Although China still remains on the precipice of the credit crunch that we have been outlining in recent months, some positive data has come along in recent days to buoy market sentiment. On Sunday it was reported that Chinese exports were up 7.2% in August compared to the year before, exceeding market expectations of a 5.5% increase.
The “Real” America: Near Record 20% Struggle To Afford Food, Highest Since Crisis Began
With US equity markets on a 7-day roll and excited TV anchors proclaiming the worst over and new all-time highs must signal recovery as they ‘celebrate’ five years on from Lehman, the following two charts of the state of real America should open a few eyes to just how blinded American has become to the truth (unless you live it). A stunning 20.0% of Americans were found to have struggled to afford food in the last year – surging in recent months to its highest since the peak of the crisis in 2008 – as American’s ability to consistently afford food has not recovered to pre-recession levels. Furthermore, Americans access to basic needs (13 factors including housing, healthcare, and food) hovers near record lows – dramatically lower than pre-recession levels. The Gallup polls point to a very different image of American than Dow 15,000 – and is set to get worse as the food stamp program is set to be cut in November.
More Americans are struggling to afford food — nearly as many as did during the recent recession. The 20.0% who reported in August that they have, at times, lacked enough money to buy the food that they or their families needed during the past year, is up from 17.7% in June, and is the highest percentage recorded since October 2011. The percentage who struggle to afford food now is close to the peak of 20.4% measured in November 2008, as the global economic crisis unfolded.
Americans remain as likely to have access to basic necessities in general now as they were in October 2011, when it was at its lowest point. The Basic Access Index, which includes 13 questions about topics including Americans’ ability to afford food, housing, and healthcare, was 81.4 in August, on par with the all-time low of 81.2 recorded in October 2011.