European indices cool as the heat rises

After three weeks of impressive gains, almost all of the European indices have given some back in the morning trading session.

It looks very much like European equity traders have lost their bottle ahead of this afternoon’s speech from Federal Reserve chairman Ben Bernanke, as he starts his two-day semi-annual review of the US economy.

As the world’s analysts sit poised ready to try and decipher his comments, it is almost guaranteed that he will say something that can be left completely open to interpretation, affording the equity markets the opportunity to panic if they wish.

Markets are still slightly worried about the rumoured September start to the tapering of the US quantitative easing policy, even though the Fed has two targets that they require to be met prior to this: dropping to the 6.5% level (currently 7.6%,) and inflation increasing to 2% (currently 1%).

Looking at the performance of the FTSE over the last three weeks we can see that it has managed to add the best part of 10% in that time, and with such potentially market-moving comments imminent it is not too surprising that there has been a bit of a sell-off.

On the other hand, of course, the market’s behavior could simply be chalked up to their natural ebb and flow.

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