Risk aversion came back yesterday as ECB delivered a dovish statement after the September meeting and Fed Chairman's speech offered nothing new in stimulating the economy. Macroeconomic data remained weak. Gold rebounded strongly after 2 days' selloff with the benchmark contract soaring to as high s 1873.3 before settling at 1857.5, up +0.85%. Oil prices slipped with the front-month WTI contract losing -0.32% and the equivalent Brent crude contract down -1.08%. The 447B plan offered by US President Barack Obama after the market close may help relieve the market in the short-term.

The ECB left the main refinancing rate unchanged at 1.5% and delivered a dovish accompanying statement. The central bank revised lower growth forecasts and did not signal upside risks to inflation. ECB staff forecast annual real GDP will grow 1.4-1.8% in 2011 and 0.4-2.2% in 2012. The projections were revised lower when compared with June's estimates. The risks to the economic outlook are tilted to the downside. Concerning inflation, policymakers believed near-term risks are 'broadly balanced'. While rises in commodity prices and increases in indirect taxes and administered prices might drive up prices, weaker than expected growth in the Eurozone and globally present some downside risks. Staff projections on inflation stayed unchanged at 2.5-2.7% for 2011 and 1.2- 2.2% for 2012. President Trichet said the committee 'never pre-committed' and stands ready to do 'whatever is necessary', the tone of the statement suggested that the ECB is ready for a rate cut should the economy deteriorate further.

Speaking to the Economic Club of Minnesota in Minneapolis, Fed Chairman Bernanke acknowledged that the pace of recovery has been 'much less robust' than previously anticipated' with 'the weakness of the housing sector' and 'continued financial volatility' being the two key factors resulting in the situation. Moreover, a 'substantial fiscal consolidation in the shorter term could add to the headwinds facing economic growth and hiring'. As far as inflation is concerned, the Chairman said the Fed saw 'little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy'. Against this backdrop, the Fed is prepared to employ all necessary tools to 'promote a stronger economic recovery in the context of price stability'. The content of the speech was largely the same as the one at Jackson Hole. Bernanke's failure to signal which tool is more preferable at the current situation disappointed investors.

President Obama unveiled a 450B job proposal which mainly targeted tax cut and investments. While more details will be released on September 19, the measures include a tax-cut for small businesses if they hire new workers or raise workers'; a 4 000 tax credit if a company hires anyone who has spent more than 6 months looking for a job and extra tax credits if they hire America's veterans; a 1-year payroll tax cut; extension of unemployment insurance and assistance on refinancing homeowners' mortgages. Obama called for an end to the 'political circus' which he believed is the main reason for S&Ps downgrade.

The macroeconomic data were mixed in the US. Initially jobless claims unexpectedly rose +2K to 414K in the week ended September 3. The 4-week moving average was brought higher to 415K, the highest level since July 23. The trade data surprisingly improved with trade deficit narrowing to 44.8B in July from 53.1B in the prior month.