The FTSE 100 began the quarter at 5727 and ended it at 5871. It was for once a fairly steady period. The end of July saw Mario Draghi pronounce that he would do everything in his power to ensure the European bond markets functioned efficiently. It was enough to stop the major hedge fund groups from attacking the markets as no individual fund is bigger and more powerful than the European Central Bank.
Now the problem with the European Central Bank is that it is not currently a central bank! Unlike the US Fed and the Bank of England it is not a central bank of last resort. So the ECB needs a concerted effort from all the European Governments to back up its rhetoric. That has proved impossible from the hyper-inflation fearing Germans so far, but the tide is turning. The Germans don’t need things fixed in a hurry because that would strengthen the Euro and cause a rise in price of their exports. But they can’t let it break either. So it is politics not economics which has caused over two years of treading water.
However the ECB has just started to act like a central bank. And not a day too soon with Spain increasingly finding it difficult to replace it’s maturing debt at a reasonable cost.
Meanwhile the rest of the world is printing money again, with the Fed pumping at least $40 billion a month into the system to try to stem un-employment. There is a phrase across the pond which says “Never bet against the Fed”. All this cash coming into the markets will now drive stockmarket returns higher. We are in.