Valenti International - Dismal US Payrolls Bolster QE2 Calls...

Online, October 14, 2010 (Newswire.com) - "Valenti International" analysts have told clients that a second round of quantitative easing by the US Federal Reserve is significantly closer after the US nonfarm payrolls revealed that the economy lost more jobs than expected during September.

Economists had been expecting the economy to have created 3,000 jobs but Labor Department data reported that employers had axed 95,000 jobs. Nevertheless, US stock indices shrugged off the bad news and continued their grind higher as investors regarded the news as bolstering the case for another injection of monetary stimulus from the Fed.

"We didn't expect the markets to fall because it's become abundantly clear over the last two weeks that investors are pinning their hopes for equity values on QE2", said a "Valenti International" trader. He cautioned, however, that much of any boost from QE2 is already "baked into the cake" and warned that the eventual announcement could see markets sell off in what he called a "classic sell-the-news" event.

The scale of any sell-off would be entirely dependent upon the size of the stimulus the Federal Reserve opts for but "Valenti International" believes that anything more than $500bn would limit the downside.

The firm is thought to be expecting a pullback in the weeks leading up to the next meeting of the FOMC and has advised clients to expect additions to its conviction buy list.