Radio Rallies & Reversals
Markets are rallying hard today after a better than expected US Non-Manufacturing report, and news that the Bank of Japan is moving from a policy of 0.1% currently, to a range of 0% to 0.1%; In addition, they will buy government and corporate debt. Yesterday I talked about some of the benefits of quantitative easing in the US, including a response by other central banks in kind - Looks like its happening, and the global markets love it. So what are the implications of low interest rates?
According to the Bottonwood article in last weeks Economist magazine, low rates could be a signal for subdued economic and thus corporate profit growth ahead. According to David Bowers of Absolute Strategy Research, "low rates in the developed world will eventually boost global growth as they are imported by the developing world via managed exchange rates, but it looks like it is also leading to trade disputes.
The more the economic outlook turns Japanese, the harder it will be for equity markets, but for now low rates seem to be drawing investors into risky assets.
GB
According to the Bottonwood article in last weeks Economist magazine, low rates could be a signal for subdued economic and thus corporate profit growth ahead. According to David Bowers of Absolute Strategy Research, "low rates in the developed world will eventually boost global growth as they are imported by the developing world via managed exchange rates, but it looks like it is also leading to trade disputes.
The more the economic outlook turns Japanese, the harder it will be for equity markets, but for now low rates seem to be drawing investors into risky assets.
GB
posted by Gordon Bell at
10:18 AM
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