Sunday, September 18, 2011

Markets improve as mixed news flow continues

The good news: the European Central Bank announced it would work with the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to provide three-month loans to banks through the end of this year. The mixed news: while attending a meeting of European finance ministers in Poland, U.S. Treasury Secretary Timothy Geithner said, “Governments and central banks have to take out the catastrophic risk from markets”. In response, Austria’s finance minister Maria Fekter said, “I found it peculiar that even though the Americans have significantly worse fundamental data than the Eurozone, that they tell us what we should do and when we make a suggestion ... that they say no straight away”. The bad news: UBS, Switzerland's largest bank, announced that a London based trader lost the firm $2 billion.

MY TAKE: Global markets welcomed the news of short-term funding efforts to the Eurozone economic mess but managing a longer-term solution is still elusive. Additionally, the UBS event reminds us of issues within the global banking system. Markets will continue to move on both the hopes for crisis resolution and recognition that more work needs to be done. This week, the U.S Federal Reserve discusses Operation Twist (yes, the name comes from the Chubby Checkers song ).

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