Asian markets should be spurred on by Bernanke

Asian futures markets look set to open higher after Fed Chairman Ben Bernanke’s perfect delivery.

This could be his final bi-annual testimony at Congress. He set the tone exactly right and delivered what the markets needed; calm.

There were no surprises, as he ignored the tapering timetable, and reiterated that they are ready to act and increase purchases if needed by the economy, with the goal of supporting the economy until it is ready to grow on its own. He also mentioned that the Fed will start tapering asset purchases later this year if economic data continue to evolve as expected.

Although this is nothing new, it means investors will continue to focus on US economic data prints, and any print coming in line or beating expectations would mean predictions heat up around when tapering will happen. He is set to speak again tonight, when we don’t expect him to deviate from his message.

The view that China’s slowing economic growth will fall short of its forecast this year continues with the IMF issuing a report stating that the “growth outlook is clouded by mounting domestic vulnerabilities in the financial, fiscal and real estate sectors”.

We have always taken the view that China is in a different growth path than it was a decade ago, with double-digit growth and GDP numbers that would surprise on the upside.

This slowdown is due to structural shift, with a low unemployment rate, a steady increase in wages and a centralised government. Their goal of a sustainable growth for China is likely to be achieved. The main question surrounds the level of growth the market is willing to accept for China.

Commodities

Copper prices continue to remain soft, falling 0.5% this week and 14% this year. While reports of demand for industrial metals such as copper, zinc and lead consumption are expected to remain stable this year, according to Beijing Antaike Information Development this bullish report will have investors looking for a floor in the metals prices.

Gold futures dipped down to $1270 after touching a high of $1299, and remain unable to break through the $1300 resistance level. The next days of trading session will be key as to whether it will test the resistance level again.

WTI is trading near the highest price level of $106.48 this week after US stockpiles showed it dropped to its lowest level since January. Brent for September traded higher, at $108.55.

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