Markets vulnerable to 'large correction' if QE3 flops

Investors are preparing for a sell-off in equities if policy action in the US and Europe fails to be aggressive enough.

The US Federal Reserve provided some hope for investors Friday after saying it would "provide additional policy accommodation as needed to promote a stronger economic recovery." An upcoming policy meeting in the middle of the month is being seen as the moment of truth for investors, following on from expected European Central Bank action. ECB president Mario Draghi is expected to announce a bond-buying programme later this week. However, equity strategists are concerned the US will hold back from expanding its easing programme this month given the uptick in GDP growth, leaving stocks ...