Wednesday, June 20, 2012
Leaders of the Group of 20 (G-20) developed and developing
nations failed to come up with any concrete actions in their
two-day summit meeting in a beautiful Mexican resort town. But
hardly anyone expected the Germans to agree to anything tangible
ahead of the Euro-zone summit scheduled for later next week in
Brussels. There is no shortage of workable ideas that could turn
the tide, ranging from a banking union to using the permanent
bailout fund to directly buy the government bonds of Italy and
Spain. The politics and process of implementing any of these ideas
will likely be drawn out, but coming up with a roadmap at next
week's Brussels summit will be a big achievement by itself.
Few may have expected the two-day G-20 summit to take any
concrete steps, but pretty much everyone expects the two-day FOMC
meeting concluding this afternoon to come out with something
tangible. The Fed is expected to keep the monetary stimulus party
going by announcing an extension of the current Operation Twist,
which ends later this month. Other options include a fresh
bond-purchase program or further extending the Fed's current
guidance of keeping interest rates near-zero through 2014.
Hardly anyone can credibly claim that more Fed stimulus will do
any real good to the economy, given where interest rates are
already. The only rationale for more action is that the markets
have been expecting it and the Fed doesn't like disappointing Mr.
Market. The strong market rally of recent days, despite negative
headlines from Europe and growing signs of loss of momentum in the
U.S. and Chinese economies, reflects these positive expectations.
Given these gains, Mr. Market may find the actual announcement of a
Twist extension to be rather underwhelming. Such a response will
get interpreted as the age-old buy-the-rumor-sell-the-news
In corporate news, we have entered the pre-announcements season
and we got two negative announcements this morning - from
Proctor & Gamble
) - with Europe a common factor in both.
) shares will likely be in the spotlight after the company
announced positive results of its hepatitis C treatment.
ADOBE SYSTEMS (ADBE): Free Stock Analysis
IDENIX PHARMA (IDIX): Free Stock Analysis
PROCTER & GAMBL (PG): Free Stock Analysis
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Director of Research