Markets across the globe were close to dead early in the week as they waited on an official announcement from the Federal Reserve about a tapering timeline. But it wasn’t to be, with the Ben Bernanke announcing they would continue with the current bond buying program for now. Markets were set for a party on Thursday.
Tapering talk was put to rest on Thursday morning local time, propelling markets around the globe higher as investors embraced risk once again.
The rationale for maintaining the current bond buying program was the economic data wasn’t strong enough to support the withdrawal of the existing stimulus package. It was essentially a green light from the Federal Reserve to load up on taking risk.
Continuation of stimulus pushed the ASX 200 57 points higher to close Thursday at 5,295 points – the highest mark in over five years.
Investor interest also spiked, with the number of shares trading hands after the announcement well above the average volume traded over the past 30 days.
With Lawrence Summers now out of the running to be the next chairman of the Federal Reserve, investors can rest easy his successor will either be Janet Yellen or Donald Kohn, who are believed to have similar views to Bernanke on easing.
Aussie dollar dramas
No tapering was a cue for the Australian dollar to strengthen against the US dollar, and that it did. In the early hours of Thursday morning, the Australian dollar jumped almost two whole cents to US$0.9525.
Comments from RBA board member John Edwards quickly took some heat out of the currency, sending it back to the mid-94 cent mark by Friday morning. Frustrating commentators and policy makers alike is the constant reference by RBA board members that we need a lower currency, without actually putting a number on it.
A weaker dollar is essential as stimulus to the economy and helping out troubles sectors like manufacturing, tourism and retail. If the currency remains around the mid-90 cent mark, it is going to be problematic once again for these sectors and ultimately business and consumer confidence.
Premier reported some impressive results for a retail stock this earnings season but it wasn’t enough to please investor. No outlook commentary had investors nervous, leaving Premier nearly 0.1 per cent softer on Tuesday.
Stars of the Premier brand were sleepwear brand Peter Alexander and stationary favourite, Smiggle. Of concern for investors was the poor performance of Jay Jays and Just Jeans – new management has been hired in a bid to turn these brands around.
After closing at $8.31 on Tuesday, Premier ended the week at $8.41