An inner glow on Wall Street
Last night was an important one for world markets. First, and most importantly, influential New York Federal Reserve President William Dudley signalled that if the US recovery gets off the track then there could be more stimulus. Everyone interpreted that to mean more money printing via quantitative easing.
Money printing exercises by central banks really boost shares and commodities because that's where large chunks of the funds end up.
The US has had two massive quantitative easings which have sent the US markets through the roof but have had only a marginal effect on economy. That news from William Dudley was just what markets wanted to hear, because it almost turned last night's further bad US labour news into a market bull point. As the market bulls see it, if the economy surges then we will see good demand for shares. If the economy is sluggish or turns sour then we will see more money printing, which is even better for shares.
But there were also indications that the massive productivity drive undertaken by American companies is really paying off despite the sluggish economy, with early signs of good results ahead. And over in Europe there was a favourable bond auction in Italy.
The clear message coming into the markets is that while the underlining problems remain central banks will do whatever they believe is required to keep the show on the road. And that's good for shares and commodities.
It is also good for the Australian dollar.
And finally, Wall Street has its man set to be the Republican candidate for the net election. That provides a warm inner feeling on Wall Street – which might be wrong – that the deep underlying problems will be kept under the carpet so everyone can make lots of money.