{"id":1039,"date":"2012-06-11T06:00:00","date_gmt":"2012-06-11T06:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2012\/06\/11\/viewpoint-fed-here-comes-the-cavalry\/"},"modified":"2012-06-11T06:00:00","modified_gmt":"2012-06-11T06:00:00","slug":"viewpoint-fed-here-comes-the-cavalry","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-fed-here-comes-the-cavalry\/","title":{"rendered":"Viewpoint:  Fed: here comes the cavalry!"},"content":{"rendered":"<p style=\"text-align: justify;\">In Europe the talks go on but so far we have seen little action.   European leaders are in the progress of negotiating a new \u201ceuro vision\u201d   for the monetary union. The ECB is taking part in the debate. The final   outcome will take time, but the emergence of the political could help   restore some confidence&#8230;&#8230;.<strong> <\/strong> <br \/><strong> <\/strong><\/p>\n<p>  <!--more-->  <\/p>\n<ul> <\/ul>\n<ol><\/ol>\n<ol><\/ol>\n<ol><\/ol>\n<ol><\/ol>\n<hr \/>\n<p> Sign up for our free newsletter to receive weekly news from BONDWorld<br \/> <a href=\"index.php?option=com_acymailing&#038;view=user&#038;Itemid=107\"><strong>Click  here to register for your free copy<\/strong><\/a><a href=\"index.php?option=com_acymailing&#038;view=user&#038;Itemid=1023\"><strong> <\/strong><\/a>  <\/p>\n<hr \/>\n<p style=\"text-align: center;\"><strong>For professional investors and advisers only<\/strong><\/p>\n<hr style=\"text-align: justify;\" \/>\n<p style=\"text-align: justify;\">Yellen  and Bernanke have paved the way for new monetary stimulus. Yellen and  Bernanke spoke almost as a single voice in describing the economic  scenario and the risks involved, and this certifies that the FOMC is  ready to act soon. Both their speeches chose not to dwell on poor recent  data, and stressed the importance of underlying trends, less affected  by idiosyncratic factors. The economic outlook is still characterised by  \u201cmoderate growth\u201d, albeit marred by \u201csignificant\u201d negative factors,  that will considerably hinder return to full employment. Inflation  should stay in line with the 2% target, or below. According to Yellen,  payrolls expanding at the pace seen on average since the beginning of  the year would do little to improve labour market conditions. What\u2019s  more, high unemployment is mostly of a cyclical nature, rather than  structural. This is the precondition for any monetary policy action,  which affects cyclical behaviour, but not structural factors. A drag on  growth is coming from: residential construction, fiscal policy,  uncertainty, and conditions abroad. US fiscal policy is already  restrictive, and will become even tighter in the coming quarters: this  is a given. An additional risk factor is the coming into force of  automatic fiscal measures at the beginning of 2013, which adds to the  uncertainty and depth of negative potential scenarios. International  pressures, even assuming a non-deflagration of the European crisis, are  already holding back the US economy, via slower exports due to the  recession in Europe and to the appreciation of the dollar, and via the  contagion carried by global financial conditions. The combination of  excessively weak demand to rebalance the labour market, and of downside  risks to inflation, provide the logic pressing for new interventions.  For the time being, inflation expectations are anchored at 2%, and are  halting downside adjustments to prices and salaries, despite the  presence of substantial spare resources. However, Yellen notes that a  downward spiral of wages and prices could be triggered by an  interruption of labour market recovery. Hence a key point: \u201crisk  management considerations\u201d strengthen the case for additional  accommodation. Yellen said that \u201cif the Committee judges that the  recovery is proceeding at an insufficient pace, we could undertake  portfolio actions such as additional asset purchases or a further  maturity extension programs\u201d. Bernanke assured that the FOMC will assess  the strength of the recovery, a \u201ckey issue\u201d together with the  assessment of price stability. Should it be necessary to intervene, the  Fed has \u201cseveral options\u201d: Bernanke does not to \u201ctake anything off the  table\u201d and said that the FOMC may have to make \u201ctough decisions\u201d based  on \u201cdifficult assessments\u201d. In our view, at its June meeting the FOMC  could announce new stimulus measures worth around 100-200 billion  dollars up to September: either an extension of \u201coperation twist\u201d  (lengthening maturity of debt), or an increase in purchases, with their  sterilisation. A deterioration of the scenario could prompt the FOMC to  introduce new stimulus in September. Obviously, the decision would be  taken despite explicit dissent, but we know that Bernanke\u2019s Fed is used  to governing with a majority, and does not wait for a unanimous vote to  take important decisions.<\/p>\n<p style=\"text-align: justify;\">In  Europe, indications have emerged in the past week that high-level talks  are under way to redefine the Monetary Union setup. The plan should  include the establishment of a European banking sector watchdog, as well  as a higher degree of \u201cmutualisation\u201d of fiscal policies and a transfer  of powers from the States to the Union. If consensus and political  commitment take shape already at the Euro summit at the end of June, the  balance of risks could shift considerably. In the meantime, in addition  to uncertainty on the outcome of the Greek elections on 17 June, the  Spanish front line remains open. It seems that is only a matter of days  before the Government will request European support to recapitalize  monetary and financial institutions through the FROB. A direct  recapitalization of banks without a formal request from Madrid fell off  the table. Markets do not seem overly concerned that a EU aid request  for banks could impair further sovereign returns, yet conditions could  change rapidly.<\/p>\n<hr \/>\n<p> <strong>Appendix<br \/><\/strong> <\/p>\n<p style=\"text-align: justify;\"><strong>Analyst Certification<\/strong><br \/>The  financial analysts who prepared this report, and whose names and roles  appear on the first page, certify that: (1) The views expressed on  companies mentioned herein accurately reflect independent, fair and  balanced personal views; (2) No direct or indirect compensation has been  or will be received in exchange for any views expressed. Specific  disclosures: The analysts who prepared this report do not receive  bonuses, salaries, or any other form of compensation that is based upon  specific investment banking transactions.<\/p>\n<p><strong>Important Disclosures<\/strong><br \/>This  research has been prepared by Intesa Sanpaolo S.p.A. and distributed by  Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the  London Stock Exchange) and Banca IMI Securities Corp (a member of the  NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for  the contents of this report. Please also note that Intesa Sanpaolo  S.p.A. reserves the right to issue this document to its own clients.  Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo  Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both  authorised by the Banca d&#8217;Italia, are both regulated by the Financial  Services Authority in the conduct of designated investment business in  the UK and by the SEC for the conduct of US business.<br \/>Opinions and  estimates in this research are as at the date of this material and are  subject to change without notice to the recipient. Information and  opinions have been obtained from sources believed to be reliable, but no  representation or warranty is made as to their accuracy or correctness.  Past performance is not a guarantee of future results. The investments  and strategies discussed in this research may not be suitable for all  investors. If you are in any doubt you should consult your investment  advisor. <br \/>This report has been prepared solely for information  purposes and is not intended as an offer or solicitation with respect to  the purchase or sale of any financial products. It should not be  regarded as a substitute for the exercise of the recipient\u2019s own  judgement.<br \/>No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities  accept any liability whatsoever for any direct, consequential or  indirect loss arising from any use of material contained in this report.  <br \/>This document may only be reproduced or published together with the  name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo  S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management  Policy for managing effectively the conflicts of interest which might  affect the impartiality of all investment research which is held out, or  where it is reasonable for the user to rely on the research, as being  an impartial assessment of the value or prospects of its subject matter.  A copy of this Policy is available to the recipient of this research  upon making a written request to the Compliance Officer, Intesa Sanpaolo  S.p.A., 90 Queen Street, London EC4N 1SA.<br \/>Intesa Sanpaolo S.p.A. has  formalised a set of principles and procedures for dealing with  conflicts of interest (\u201cResearch Policy\u201d). The Research Policy is  clearly explained in the relevant section of Banca IMI\u2019s web site  (www.bancaimi.com).<br \/>Member companies of the Intesa Sanpaolo Group, or  their directors and\/or representatives and\/or employees and\/or members  of their households, may have a long or short position in any securities  mentioned at any time, and may make a purchase and\/or sale, or offer to  make a purchase and\/or sale, of any of the securities from time to time  in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and  circulates research to Qualified Institutional Investors in the USA only  through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167  New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This  document is intended for distribution only to professional investors as  defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a  printed document and\/or in electronic form. Person and residents in the  UK: This document is not for distribution in the United Kingdom to  persons who would be defined as private customers under rules of the  FSA.<br \/>US persons: This document is intended for distribution in the  United States only to Qualified Institutional Investors as defined in  Rule 144a of the Securities Act of 1933. US Customers wishing to effect a  transaction should do so only by contacting a representative at Banca  IMI Securities Corp. in the US (see contact details above). <br \/><strong><br \/>Valuation Methodology<\/strong><br \/>Trading  Ideas are based on the market\u2019s expectations, investors\u2019 positioning  and technical, quantitative or qualitative aspects. They take into  account the key macro and market events and to what extent they have  already been discounted in yields and\/or market spreads. They are also  based on events which are expected to affect the market trend in terms  of yields and\/or spreads in the short-medium term. The Trading Ideas may  refer to both cash and derivative instruments and indicate a precise  target or yield range or a yield spread between different market curves  or different maturities on the same curve. The relative valuations may  be in terms of yield, asset swap spreads or benchmark spreads.<br \/><strong><br \/>Coverage Policy And Frequency Of Research Reports<\/strong><br \/>Intesa  Sanpaolo S.p.A. trading ideas are made in both a very short time  horizon (the current day or subsequent days) or in a horizon ranging  from one week to three months, in conjunction with any exceptional event  that affects the issuer\u2019s operations. In the case of a short note, we  advise investors to refer to the most recent report published by Intesa  Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation  methodology, earnings assumptions and risks. Research is available on  IMI\u2019s web site (www.bancaimi.com) or by contacting your sales  representative.<\/p>\n<p>Source: BONDWorld &#8211; Intesa Sanpaolo \u2013 Research Department<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In Europe the talks go on but so far we have seen little action. European leaders are in the progress of negotiating a new \u201ceuro vision\u201d for the monetary union. The ECB is taking part in the debate. The final outcome will take time, but the emergence of the political could help restore some confidence&#8230;&#8230;.<\/p>\n","protected":false},"author":2,"featured_media":3455,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1039","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1039","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1039"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1039\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3455"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1039"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1039"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1039"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}