Markets show nerves ahead of Jackson Hole

European markets slipped lower in early trading on Thursday, tracing the Asian markets down as investors show their nerves ahead of the Bernanke speech at Jackson Hole tomorrow. Broadly speaking traders have pulled out of equities whilst they await the speech to scrutinise any possible hints of further stimulus.

Trading volumes continue to be extremely low, highlighting investor reluctance to place trades before the speech, which is perhaps even more highly anticipated following better-than-expected pending home sales in the US yesterday. With the US housing market looking stronger than in recent times, will Bernanke see this as an excuse to pause and keep the markets guessing? What is essential to remember is that the closer we are to the US Presidential Elections the less likely we are to see the all clear from Bernanke for more Quantative Easing and as such, there is an element of time pressure is starting to emerge.

As Draghi will not be in attendance at Jackson Hole, it would appear that he is conscious that he may disappoint the markets if he speaks out too soon or if details of the bond buying scheme don’t live up to expectations. It is widely anticipated that he will be working tirelessly over the coming days to try to smooth over any objections from the German Bundesbank as quietly as possible, before adding flesh to the bone of the bond buying scheme in the meeting on September 6. If for any reason he is unable to add more details, a market reversal could be seen with investor optimism at high levels.

In UK trading, miners weighed heavily on the FTSE as the cooling Chinese economy has triggered a reduction in demand for commodities such as iron ore and steel. Kazakhmys, Evraz and Vedanta had all shed over 2.2% by mid morning.

WPP topped the loser board in morning trading after the advertising group lowered its full-year outlook. They are now forecasting like for like revenue growth for 2012 of 3.5%, compared to the budgeted 4.5%. This stock is often seen as an indicator of economic conditions to come and so the downward revision of its full-year revenue forecasts is affecting broader sentiment. The stock lost 2.9% of its value by mid morning.

Barclays also hit the headlines this morning with news that it has promoted from within to fill the vacant CEO position. Anthony Jenkins, currently head of Barclays Retail and Banking Business, takes over with immediate effect. The share price saw little change, trading down 1.7%.

With little domestic data due this morning trader focus will be on the US initial jobless claims due this afternoon.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.