Credit: Overnight equity markets were under pressure from commodity prices and poor earnings results ahead of U.S. Federal Reserve Chairman Ben Bernanke's eagerly awaited speech tomorrow at the Jackson Hole central bank summit. Hong Kong lead emerging markets lower by 1.19% as the entire region closed in a sea of red ink. 
If you continue to feel like your portfolio is mimicking a yo-yo you are not alone. Earlier in the week market participants speculated that the Federal Reserve absolutely had to make some ground-breaking news, but as we approach the final hours before Bernanke's speech, market sentiment has begun to shift towards no big news. Market participants are finally realizing the timing of the Jackson Hole meeting is not conducive to any dramatic announcements.
As I pointed out yesterday, Bernanke is likely to wait on any big announcements [premium content] due to the fact that:
- The Non-Farm Payroll (NFP) report for August is not released until September 7 th , after Jackson Hole.
- The ECB meeting, a critical inflexion point for acting, is not until September 6 th , after Jackson Hole.
- The ISM Non-Manufacturing PMI is not released until September 6 th , after Jackson Hole.
Market participants will most likely be disappointed by the Jackson Hole speech tomorrow. Emerging markets are dependent on the largest economy as well as Europe and likely will follow suit.
The key leading up to the FOMC meeting is not necessarily QE3, but rather how Bernanke is prepared for the possibility of a fiscal cliff coming at the end of the year. Doing a little research and number crunching, I think the fiscal cliff could slide the U.S. back into recession with a -3% - 4% effect on GDP, in which the ripple effect will be felt in all emerging markets.
Declining commodity prices continue to hurt steel mills and miners with iron ore currently hovering near the $90 per ton level. Mining is slowing in emerging markets giant China.
Turning to the emerging markets subcontinent of India, the NIFTY and Sensex were both hit hard until the last hour of trade, when the real estate and banking sectors took leadership positions, reversed a loss of 60 points, and moved sharply higher sending the NIFTY to 5315.05.
The move seems to be from foreign buyers. Foreign funds were net buyers on the day and have been for the entire month of August. Foreign buyers purchase roughly 1.43 billion rupees ($25,705,555) worth of equities compared to domestic funds buying nearly 2.40 billion rupees ($43,142,189) in equities.
Economic data affecting emerging markets:
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Commodity Marker - Electronic Trading
Precious metals corner
Gold and silver prices edged lower in electronic trading ahead of the U.S. session. Volatility continues as traders look for guidance from Bernanke's speech tomorrow. Gold price is now suggesting no dramatic announcements at Jackson Hole but the sentiment could shift several times before the speech.
ETF holdings
Holdings in the world's largest gold-backed ETF, the SPDR Gold Trust ( GLD , quote ) held at 1,289.52 tons as of August 29 from the previous trading day.
The iShares Silver Trust ( SLV , quote ) pulled back for the third session in a row to 9,763.53 tons on August 29 from the previous trading day. SLV is the world's largest silver backed ETF.
Fundamental outlook
Precious metals traders will be listening intently to Bernanke's comments. If he downplays the prospects of a fresh round of quantitative easing (QE3), gold will likely decline very quickly.
Looking at the pre-market we find:
All is quiet in the emerging markets arena thus far in the pre-market.
Bottom line : Today is a likely carbon copy of yesterday with economic data being light and markets in for more of the same dull grind ahead of Jackson Hole. Developed and emerging markets will be looking for clues as to the FOMC's actions as well as commentary from other key officials and CEOs.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
