Two more weeks to go before Mario Draghi, the president of the European Central Bank (ECB), outlines the plan for the eurozone, which must bring down the borrowing costs for the likes of Spain and Italy. At the same time, it has to add liquidity to the European economic bloc to ensure China’s biggest customer doesn’t get mired in a long drawn-out recession.

Meanwhile, US investors are hoping for some more money supply – that is, a third quantitative easing package (QE3) – for their economy, though it might be less necessary if the Europeans nail it on September 6.

Will the US stimulate?

I suspect US Federal Reserve chairman Ben Bernanke will avoid QE3 if the Europeans get it right and excite stock markets, but if they let the team down, then he will likely play his QE3 card in mid-September when the Fed’s monthly Federal Open Markets Committee (FOMC) meeting determines monetary policy for the USA.

It’s exciting or anxiety-creating stuff and it comes while the charts are telling us that gravity could be working against higher stock prices if no great ‘positive shock’ comes out of Draghi’s words.

On Friday at the New York Stock Exchange, the professionals liked what Ben Bernanke had to say about there being room for something like QE3 and at the same time the ECB talked about aiming to keep sovereign bond yields for countries such as Spain and Italy under control and within a specific target range.

These utterances have raised my hopes that the ECB won’t screw up, which is a giant positive. However, we have a two-week wait for the Europeans’ ‘show and tell’, but before that we have Ben Bernanke speaking at Jackson Hole at the end of this week. This annual speech has long been seen as an event where the Fed boss gives away a lot of hints about his next steps.

Making the event even more attractive for professional market players and scribes is the fact Mario Draghi is on the card as well. This will be a must-watch show and could have significant market implications.

Good news

For those who want to know about good news, US durable goods orders spiked nicely higher in July continuing the run of mixed data on the US economy.

Apart from Jackson Hole, there are many data events this week. In the US look out for:

• The S&P/Case-Shiller home price index and pending home sales;
• Consumer confidence;
• GDP, corporate profits, personal income & spending; and
• The Chicago PMI, factory orders.

The economic picture that emerges from this week will have a big bearing on how Bernanke moves in mid-September, but the main game is the ECB’s effort on September 6 and Jackson Hole could be a nice warm up event on Friday, USA-time.

Let’s hope it is a warm up and not a ‘cool down’ event for stocks!

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice.