James Saft

Market loses Fed crutch: James Saft

Apr 5, 2012 04:13 UTC

By James Saft

(Reuters) – So now we will finally get to see if the stock market can stand on its own two feet.

The Federal Reserve signaled this week that an additional round of extraordinary help such as quantitative easing is probably not in our immediate future, and so far risk assets like stocks are not liking it one little bit.

Minutes from the Fed’s March meeting released on Tuesday showed a more constructive tone about the economy and, crucially, revealed that only two members of the policy-setting open market committee saw the case for more monetary stimulus. That’s a sharp change from the month before when ‘a number’ of members believed current conditions could justify additional easing. That slight chill breeze you felt was from the door slamming on any move in that direction at the Fed’s April meeting, implying that only a relapse in the economy will bring more help.

Risk markets, such as equities, have duly sold off since the news, as investors made new calculations about how much, exactly, they trust the strength of the economic recovery.

“Equities have been in a temporary sweet spot where investors have been factoring in a self-sustaining U.S. economic recovery while also anticipating the imminent institution of QE3. This is a contradiction. If the economy were indeed as strong as they say, we wouldn’t need QE3,” Charlie Minter of fund manager Comstock Partners wrote in a note to clients.

Will France remain in Europe’s core?: James Saft

Apr 3, 2012 04:06 UTC

By James Saft

(Reuters) – France faces the frightening and humiliating, if narrow, chance that by the end of this year it may no longer qualify as a paid-up member of core Europe.

That’s the risk if, lulled by the apparent calming of the debt market waters and without anything approaching a strong national consensus about reform, France sails later this year into another bout of euro insecurity and finds its own debt out of favor and its ability to borrow compromised.

With an April 22 first-round presidential vote fast approaching neither of the two likely survivors, incumbent Nicholas Sarkozy of the conservative UMP or Socialist front-runner Francois Hollande, have enunciated anything approaching a strong commitment to the sorts of labor market, retirement and fiscal reforms now being espoused, if not yet successfully pursued, by weaker euro partners such as Italy, Greece and Spain.