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Sour is sweet

Published Monday, August 18th, 2014

Another fascinating week passes by. A week in which the Eurozone revealed its true weakness, the stock markets revealed that they prefer bad to good news and monthly reports from the IEA, EIA and OPEC revealed that oil demand growth is stalling whilst supply continues to increase. The week saw the US return to military action in Iraq in an attempt to halt the march of ISIS, Russia continuing to play brinkmanship with Ukraine and a ceasefire in Gaza hold.

Low wage growth in the UK was seen as delaying an interest rate increase from the Bank of England. Poor retail data and other economic mixed messages were seen as not advancing when the Federal Reserve will act. An annualised 2Q contraction in Japan of 6.8% was seen as guaranteeing even more stimulus measures from the Bank of Japan. Mediocre output numbers from China were seen as tempting the government to fall back to its usual bad stimulus habits. Dreadful growth and low inflation numbers in the Eurozone were seen as likely to force the ECB’s hand on monetary easing.

Sour economic data draws out the sweetness of QE. QE lives on and the stock markets liked it and closed higher on the week. The S&P gained 0.65%, the FTSE 100 1.85%, the Eurofirst 100 1.33% and the Nikkei 225 3.65%. They would have closed even higher but for rumours of a Ukrainian attack on a Russian armoured convoy which had supposedly crossed the border.

to read the rest of the report, please click here 

Posted by David Hufton