European Central Bank President Jean- Claude Trichet may allow Federal Reserve Chairman Ben S. Bernanke to avoid loosening monetary policy tomorrow by helping engineer a rebound in global financial markets.
Since June 7, when Europe’s equities were in a two-month slump, Trichet extended through September the ECB’s offer of unlimited cash to banks and pledged to keep buying government bonds. The Stoxx Europe 600 Index has risen 6.6 percent, and the euro has appreciated 11 percent against the dollar, wiping away the past three months’ losses. The Markit iTraxx Europe Index, which measures the cost of protecting investment-grade company bonds against default, fell to the lowest levels since May.
Markets have come back because of “easing concern about liquidity defaults in Europe and the removal of some uncertainty after the European bank stress tests,†said Lena Komileva, head of G-7 market economics at Tullett Prebon Plc, a broker for commercial and investment banks in London. “That reduces the pressure on the Fed to implement immediate action.â€
