"We've had a relatively sharp selloff over a couple of days and we're getting a bounce here," James Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.6 billion in assets, said in a phone interview. "Weaker economic numbers may be met with favor by the market because it can suggest that the Fed can slow the tapering process or not taper if the economy looks weaker than expected."

Gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent, figures from the Commerce Department showed today in Washington. Household purchases, which account for about 70 percent of the economy, were revised to a 2.6 percent advance compared with the 3.4 percent gain estimated last month.

Central bank stimulus has helped fuel a rally in stocks worldwide, with the benchmark U.S. index surging as much as 147 percent from its March 2009 low.

Stocks advanced in Asia and Europe today as the cost of locking in China's interest rates slid for a fourth day and money-market rates fell. The People's Bank of China said in a statement yesterday that it has provided financing to some financial institutions to stabilize interbank lending rates. The central bank added that it will use short-term liquidity operations and existing loan-facility tools to ensure steady markets.

David Fuller's view Short covering and some bargain hunting are fuelling a bounce in global stock markets.

It will be interesting to see how far this rally carries but I would be surprised if we saw many resumptions of the 4-year plus overall upward trends in the next few months. Instead, I expect lots of ranging for at least several months, as investors ponder uncertainties concerning global GDP growth, which remains soft and monetary policy which is still accommodative. Here is an informative related article, also from Bloomberg: Tax Bite Curbs U.S. Growth Along With Consumer Spending.


Fullermoney has always regarded monetary policy as the most important fundamental indicator for stock markets. Where it remains a powerful tailwind we do not expect bear markets of any significance. However, we could see a number of 20% plus corrections. So far, these have been mainly confined to some of the resources sectors.

(See also yesterday's comments in response to The Weekly View, and Monday's item: Lost Decade for Bonds Looms With Growing return for Equities)

In the short-term, government bond yields including 5-year US Treasuries, UK Gilts, German Bunds and Australian Bonds are oversold and susceptible to ranging consolidations near current levels. However, the underlying patterns look like base formations and the medium to longer-term outlook is for higher yields, as GDP growth eventually improves and quantitative easing (QE) is reduced or phased out. Japanese Bonds differ somewhat in that they have a spike low, which we also do not think will be exceeded, and they have been consolidating their latest rise since mid-May, prior to their next advance.