Financial markets are again on edge about the direction of Fed policy following the surprisingly hawkish minutes of the January meeting released last week, even if most still expect the central bank to keep buying bonds at the current $85 billion monthly pace at least until the end of the year.
There are still plenty of macro factors to worry about around the world, but China seems to have dropped down the charts. Conversations with delegates at TradeTech Asia, the annual trading heads’ conference held in Singapore, revealed that the U.S. fiscal cliff, food inflation, geopolitical risks in the Middle-East and Europe all trumped China as the major risks out there for financial markets.
Central balance sheets across the industrialized world have increased rapidly in response to the financial crisis, as recently noted on this blog. In Europe, the balance sheet of the ECB and the 17 national central banks that share the euro currency has grown to around 3 trillion euros after the ECB injected more than a trillion into the market in 3-year loans and loosened its collateral standards.
Want the recent rally in stocks to last? Don’t count on it, says John Praveen of Prudential Financial. The Dow Jones industrial average is up over 20 percent since September, and has gained 7 percent since the start of the year. But Praveen sees too many headwinds for the boom to continue.