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Global Market Wrap-Up - December 12, 2012

Wednesday, December 12, 2012
Mark Hanna
U.S. stocks reversed an early day rally as the drug that is more QE had limited effects. As expected the Federal Reserve announced an expansion of QE, with an additional $45B a month to replace the amount that was going into Operation Twist (which was simply an asset swap of buying bonds of one duration and replacing them with another of a different duration). After the Pavlovian response to any action by the Fed of buying stocks, the market gave up those gains as the day wore on.

In addition to the additional $45B a month (bringing in total the Fed's purchases to $85B! a month), the Fed changed its targetting of when it would potentially ease from a date (mid 2015) to inflation (2.5%) and employment (6.5%) targets. But even those are useless as Chairman Bernanke said in his news conference today that those are only guideposts and do not necessarily mean the Fed would stop easing. He did however publicly say that there were questions to the effectiveness of these policies, which obviously have already been raised on these pages. In the end the S&P 500 was fractionally higher while the NASDAQ fell 0.3%. The smaller cap Russell 2000 sunk 0.7%.
  • The Labor Department said import prices fell 0.9% after three straight months of gains. October's data was revised to show a 0.3% increase rather than the previously reported 0.5% gain. Imported petroleum prices fell 3.6% after slipping 0.2% in October. Imported food prices fell 1.3%, the biggest decline since February.
  • The Labor Department report also showed export prices fell 0.7% last month, the largest drop since June. Export prices were flat in October.
Oil added 98 cents to $86.77 a barrel, while gold prices gained $8.30 to $1,717.90. Silver surged 76 cents to $33.78.

The FTSE 100 gained 0.35%, the DAX 0.3%, while the CAC-40 was fractionally higher.

The Nikkei added 0.6% while Shangai added 0.4%.
  • On Sunday, Japan will go to the polls in an election that is widely expected to result in the victory of the Liberal Democratic Party, which has said it would implement aggressive monetary easing measures.