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US equities holding up on low volume

Last updated 8/20/2012 4:27 AM ET (GMT -5) 0 Comments - Add your comment

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David Morrison

Market Strategist, GFT

Follow @DMorrison_GFT

US stock index futures are a touch weaker in early trade, taking on the tone from the mixed close on Asian Pacific markets. China's Shanghai Composite closed at a fresh three-year low. The expectation of imminent monetary stimulus has been dampened after the People's Bank of China resumed reverse repo transactions last Thursday. This indicates that there are no immediate plans to cut the Required Reserve Ratio, despite Premier Wen Jiabao raising hopes for further monetary easing earlier last week.The major US indices eked out another positive session on Friday, and narrowly missed taking out the multi-year highs hit earlier this year. Apple closed at a fresh all-time high on a broker upgrade, and as investor excitement mounts over the prospect of new products such as the iPad mini and iTV. But now investors have the last stretch of summer to deal with.  There are ten trading sessions before the US Labor Day holiday signals the official end of summer, and before then the Jackson Hole Economic Symposium takes place. So far, lower trading volumes and declining volatility (as measured by the VIX) have helped stocks follow the path of least resistance and leak higher. But with German Chancellor Merkel back from her own holiday, the euro zone's problems are back on the agenda. She is due to meet Greek Prime Minister Antonis Samaras on Friday, amid speculation that Greece will ask for a loosening in the terms agreed for its IMF/EU/ECB bailout.But before then, Wednesday sees the release of minutes from the last FOMC meeting. The meeting took place before the recent improvement on US economic data, so the minutes will be examined with that in mind. But should Ben Bernanke and other noted doves indicate that they are prepared to wait-and-see how the second round of "Operation Twist" plays out rather than stand ready to intervene more aggressively, then this will reduce the likelihood of additional Fed stimulus this year.

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About The Author

David Morrison has worked in financial markets for over 25 years. He joined GFT in February 2009 to deliver commentary and research for derivatives products. Before then David had been instrumental in setting up two spread betting companies, managed trading desks, and implemented and ran successful risk-management strategies.

He has appeared on Bloomberg, Reuters, and Sky TV, and is widely quoted by financial newswires. He has written numerous articles covering economics and trading strategies using fundamental and technical analysis.