After the storms and uncertainties – and volatility – that have characterized much of 2012, August offered investors a relatively tranquil interlude and an opportunity for many to rediscover their appetite for risk. But few of the underlying economic problems have vanished, and some may well resurface as summer draws to a close.

It was a relatively tranquil August, by the standards of the 2012 – so tranquil, indeed, that at least some investors felt confident enough to look for bargains among Spanish stocks and even hold on to their positions in sovereign debt issued by nations on the so-called periphery, such as Spain and Italy.

The question that remains on investors’ minds, however, is the extent to which that tranquility can be sustained as September dawns. There remain plenty of headwinds to global economic growth: Chinese PMI data signaled that country’s slowdown could be larger than many had anticipated, while the miniscule economic growth seen in those parts of Europe that still are growing and in most other developed markets is taking a toll on China and other emerging economies, as well as Japan.

As the new month begins, all eyes are glued to central bankers in both Europe and the United States. A meeting of the European Central Bank scheduled for later this week is expected to produce more details of Mario Draghi’s pledge to do whatever it takes to preserve the euro and revive the eurozone’s economy. In the United States, Ben Bernanke came closer than ever to declaring that a third round of quantitative easing is imminent, but still left financial markets guessing as to the nature or timing of such a move.

That kind of uncertainty – whether tied to fundamentals or policy initiatives – is likely to shape financial market performance in the coming months.

 
Learn more about how Datastream can help you better analyze macro data and quickly identify data trends and relationships.
Request a free trial today.