Anxious markets seek boost from Bernanke at Jackson Hole

 

New York

The US Federal Reserve chairman, Ben Bernanke, risks disappointing financial markets if a major policy speech today does not contain hints of additional monetary easing by the US central bank.

Mr Bernanke's annual address to the Federal Reserve Bank of Kansas economic policy symposium in Jackson Hole, Missouri, which opened last night, is being scrutinised this year as never before, but hopes that he might promise a new round of quantitative easing for the world's largest economy faded yesterday and dragged stock markets lower.

The symposium is also notable this year for the presence of two key players from outside the US: the International Monetary Fund's new managing director, Christine Lagarde, and the European Central Bank boss, Jean-Claude Trichet, who are expected to address the eurozone debt crisis that has also been weighing on markets.

The FTSE 100 closed last night down 1.4 per cent and the Dow Jones was trading down by a similar amount at lunchtime in New York, spooked by a new blow-up in interest rates on Greek government debt and a disappointing jobs report in the US.

Traders also appeared to be unwinding bets they had made earlier this week that Mr Bernanke would make an activist speech in Jackson Hole that could pump-prime markets, as he did last year when he unveiled the Fed's second round of quantitative easing (QE2). That $600bn bond-buying spree ended this June, since when economic data in the US has pointed to growing risks of a double-dip slowdown.

"Mr Bernanke is unlikely to fulfil the markets' hopes that he will pave the way for a third round of asset purchases (QE3) in his speech," Paul Dales, senior US economist at Capital Economics, said. "It is easy to make the case for more policy support based on the still high unemployment rate, the weakening economy and the recent turmoil in the financial markets. But the difference between now and last year is that the rebound in core inflation to a 19-month high of 1.8 per cent in July means there is no immediate threat of deflation. This is likely to prevent QE3 at least until core inflation starts to fall back early next year."

At its last monetary policy meeting this month the Fed promised to hold official interest rates at zero until mid-2013, a declaration that sent market interest rates tumbling to historic lows. Mr Bernanke is likely to reiterate his gloomy outlook for the US economy.

Initial jobless claims – that is, people signing on to benefits for the first time – rose by 5,000 to a seasonally adjusted 417,000 last week. Claims filed in the previous week were revised up to 412,000 from 408,000. Although the latest figure was inflated by 8,500 claims from striking workers at the telecoms firm Verizon, it was still disappointing. US unemployment, now 9.1 per cent, is now expected stay above 8 per cent into 2014.

Buffett bets on America

Warren Buffett is investing $5bn (£3bn) in Bank of America in a deal that echoes his $5bn bet on Goldman Sachs at the height of the financial crisis in 2008.

"It's a vote of confidence not only in Bank of America, but also in the country," the billionaire investor told CNBC. "All those people who think the world is going to end, I think they're wrong."

Mr Buffett's stake will pay him 6 per cent – or £300m – in dividends a year and he also gets the right, for the next 10 years, to buy up to 700 million ordinary shares at $7.14 each. BofA shares leapt 12 per cent to $7.82 on the news, netting him an instant paper profit of nearly half a billion dollars. Mr Buffett said he contacted BofA on Wednesday after dreaming up the idea in the bath.

Goldman Sachs paid Mr Buffett $5.6bn earlier this year to buy him out of a similar deal, with a 10 per cent dividend – which was earning him $15 a second in dividends.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Operations Manager

£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence