Bloomberg reports that foreign buying of US assets has dropped dramatically because confidence that the euro area’s debt crisis can be brought under control has grown of all things:
„International purchases of U.S. financial assets plunged 96 percent in September as confidence grew that Europe was beginning to solve its debt crisis and investors sold Treasuries following the Federal Reserve’s quantitative easing announcement.(emphasis added)
Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.
The Federal Open Market Committee said Sept. 13 that it would undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets improve substantially.
“QE3 certainly played its role in basically encouraging people to take risk and to some extent to short the dollar,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said. “The risk appetite was pretty strong overall, there were better places to park your money than the dollar,” and “there was a big rise in optimism regarding the euro zone.”
As we have pointed out in an earlier missive, there is actually still fairly little reason to be optimistic about Europe at this juncture, even though the sovereign debt markets have calmed down for the moment. Market participants have altogether way too much confidence in policymakers and their magic wands. This faith will eventually be put to a big test, and that includes the still widely held and utterly misguided idea that the West’s economic problems can be solved by central banks printing gobs of money.
READ MORE
No comments:
Post a Comment