Markets Turned Mixed With Three Themes in Force
European debt crisis and China took the spotlight from Fed’s quantitative program last week. The greenback was boosted higher on risk aversion in the early part of the week but reversed as sentiments stabilized. Fundamentally, markets were seeing some lights in the Irish bailout. Technically, risk markets, including stocks and commodities, drew support from key levels and recovered. The rally in treasury yield also lost steam after Fed bought $24b of securities auction. Outlook in markets are rather mixed for the moment as there was no confirmation of bearish reversal in risk trends, while recovery in risk was not too impressive to warrant trend extension. Markets will continue to struggle around these three forces, QE2, European debt and China for a while and the winner of these forces will determine the relative strength of dollar, European majors and commodity currencies going forward.

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