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Market Preview: No Game Changers

NEW YORK ( TheStreet) -- Wall Street watchers eager for further monetary stimulus may want to be careful what they wish for.

The subtext of the message delivered by Federal Reserve Chairman Ben Bernanke on Thursday was that economic conditions would have to get much worse in order to merit more accommodation; be it an extension of Operation Twist or QE3.

The view of Julian Jessop, an analyst at Capital Economics, is that there have been no big surprises of late to merit getting worked up about the possibility of the world's central banks swooping with a big rescue plan and that it may make more sense to hope things don't deteriorate to the point where such a plan would be necessary.

"The upshot is that there have been no 'game changers' this week," he wrote in emailed commentary. "It is no great revelation that, if economic and financial conditions continue to deteriorate, policy-makers will attempt to support growth. But in the circumstances in which they are likely to have deliver on their promises, underlying demand for industrial commodities in particular would probably be very weak and consistent with further falls in prices."

Paul Ashworth, the chief North American economist at Capital Economics, was of a similar mind and he found it interesting that Bernanke was vocal about U.S. legislators taking action to address the fiscal cliff.

"Bernanke's testimony didn't mention options for future monetary policy stimulus, which is telling in itself," he said. "It focused instead on urging Congress to avoid any massive fiscal tightening at the start of next year while, at the same time, to take action to put the budget on a long-term sustainable path."

Ashworth expects how Europe fares from here to be the determining factor on whether the Fed steps up once again. He believes an extension of Operation Twist is possible but views that more as a "symbolic act" as the central bank could really only keep the program up for a few more months.

"Whether we see a full-blown QE3 will depend a lot on how the situation in Europe develops," he wrote. "A Greek exit from the euro that turns out to be significantly disruptive for global financial markets would undoubtedly prompt a very rapid and powerful response from the Fed. But didn't we know that already?"
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