US Fed may not announce QE-3 until after the November election

Investors worldwide are worried that the ECB might not adopt an unsterilized bond purchase program while the US Fed might not announce QE3 ahead of the Presidential election.

As we await the Eurozone GDP report, it's unveiled that the Greek GDP contracted 6.2% Y-Y in Q-2 of Y 2012, suggesting the recession continued and implementation of fiscal austerity measures would be more difficult.

Meanwhile, as the ECB decided to stop accepting Greek sovereign bonds as collateral in its monetary policy operations, emergency funding from Greece's central bank to Greek banks increased to 106-B Euro in July from 62-B Euro in June, compared with the drop of the ECB's assistance from 74-B Euro to 24-B Euro during the period.

The Eurozone economy probably contracted -0.2% Q-Q in Y 2012. Although the 17-nation bloc avoided a technical recession after a flat GDP reading in the previous Quarter, the economic developments have been dismal.

Several peripheral countries have indeed slipped into recession and the situation will only be worse as the government implement fiscal consolidation plans. As the biggest economy in the Eurozone, Germany's GDP probably expanded modestly by +0.1% in Q-2 of Y 2012.

The country's economy ministry warned last week that trades have declined and business sentiment in recent months has dropped sharply. There pointed to "significant risks" to Germany's outlook.

Some economists forecast that Germany's economy would contract in the third quarter from Q-2, before deteriorating further in the fourth quarter. The global economic outlook will weaken should Germany fail to support the Eurozone anymore.

The UK's inflation probably eased further to +2.3% Y-Y in July from +2.4% a month ago.

In the US, retail sales gained +0.3% m/m in July after a -0.5% drop a month ago. Excluding auto, retail sales probably added +0.3%, following a -0.4% slip in June.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.