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Equity Markets Tumble Despite Bernanke Hints of a Rate Cut
October 07, 2008 10:10 PM CEST
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G10 Advancers and Decliners vs USD |
| | Sek | 1.24 |  | | | Nok | 0.89 | | | | Chf | 0.88 | | | | eur | 0.88 | | | | Dkk | 0.83 | | | | Jpy | 0.53 | | | | Gbp | 0.22 | |  | Cad | -0.71 | | | Nzd | -1.93 | | | Aud | -2.13 | |
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Global Indexes |
Current Level |
% Change |
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| DJIA Index | 9,459.85 | - 4.98 | | S&P 500 Index | 997.29 | - 5.64 | | NASDAQ 100 Index | 1,754.88 | - 5.80 | | FTSE futures | 4,467.00 | - 3.42 | | CAC futures | 3,586.00 | - 4.16 | | DAX futures | 5,230.00 | - 3.51 | | SMI Futures | 6,451.00 | - 0.98 |
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World Markets |
Current Level |
% Change |
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| Crude wti | 90.07 | + 2.57 | | Gold | 886.75 | + 3.14 | | Silver | 11.50 | + 4.17 | | USD Index | 80.97 | - 0.86 | | VIX | 53.68 | + 3.13 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| No Major Events Scheduled | | | |
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Currency Tech |
AUDUSD
R 3: 0.7944
R 2: 0.7818
R 1: 0.7743
CURRENT: 0.7321
S 1: 0.6990
S 2: 0.6776
S 3: 0.6715
EURJPY
R 3: 148.69
R 2: 146.85
R 1: 144.97
CURRENT: 139.98
S 1: 134.56
S 2: 133.53
S 3: 130.59
USDSGD
R 1: 1.4859
R 2: 1.4760
R 3: 1.4698
CURRENT: 1.4629
S 1: 1.4489
S 2: 1.4458
S 3: 1.4374
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Market Brief |
The Usd returned some of yesterday’s gains after an active trading day across the G10. The EurUsd added 120 pips bringing the pair to the low range of 1.36, while the UsdJpy was mostly flat trading with a 101 handle. The GbpUsd rose a bit over 90 pips to the low range of 1.75, showing a step towards recovery following losses incurred in the previous trading session. Equity markets continue to struggle with the Dow down 150pts, well below the 10,000 mark, which is symbolic of the overall market volatility. Bond yields continue to be squeezed with the 2yr rate at 1.4%, well below the 2% level we see in calmer environments. Commodities are mixed with oil prices stable around $89, and gold up 2% at $875.
The EU has struggled to as they failed to formulate a unified solution to the financial crisis that has spread throughout the region. Clearly the market is looking for a coordinated solution to the turmoil which spread from the US to Europe. Germany took steps restore confidence by guaranteeing bank deposits, they are expected to post 0% growth according to the IMF. In the UK, Chancellor Alistair Darling is expected to announce a bailout plan on Wednesday. He stated that he has been working closely with the BoE, the FSA, and the financial institutions involved to place the banks on “longer-term sound footing.” The rescue plan in the UK involved a massive cash injection called for Gordon Brown, the UK Prime Minister, following sell off in financials on the LSE. The efforts have been modestly taken into account with the both the Euro and the Sterling experiencing a slight recovery.
US financial markets are serving as an indicator for the softening in the greater global economy. Equity investors continue to reallocate assets out of stocks, and into more secure assets. The theme of risk aversion prevails throughout the marketplace, and it is clear through the unwinding of the yen carry trade. Bernanke spoke earlier, expressing strong indication that the Fed is likely to cut rates by approximately 50bps. The Fed Funds implied probability points to a cut to as low as 1.25%, which would be a 75bps cut. The dollar which has been resilient through the recent shift in the markets may suffer a slight pullback if rates are reduced.
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Asian Session - RBA Cuts 100bp
October 07, 2008 9:29 AM CEST
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G10 Advancers and Decliners vs USD |
| | AUD | 3.18 | | | | NZD | 3.00 | | | | SEK | 1.27 | | | | NOK | 1.04 | | | | CAD | 0.88 | | | | GBP | 0.57 | | | | DKK | 0.44 | | | | EUR | 0.41 | | | | CHF | 0.09 | | | JPY | -2.10 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 10,155.90 | - 3.02 | | Hang Seng Index | 16,803.76 | - 4.90 | | Shanghai Index | 2,157.84 | - 0.73 | | FTSE futures | 4,625.00 | - 7.59 | | CAC futures | 3,839.50 | + 2.61 | | SMI Futures | 6,515.00 | - 5.51 | | DJIA futures | 10,093.00 | + 1.29 |
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World Markets |
Current Level |
% Change |
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| Gold | 869.20 | + 1.09 | | Silver | 11.42 | + 3.39 | | VIX | 52.05 | + 15.30 | | Crude wti | 90.45 | + 3.00 | | USD Index | 81.27 | - 0.50 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| Manufacturing Output (Aug) | -0.2%,-1.6 | -0.2%,-1.4 | UK / 8.30 | | Industrial Production (Aug) | -0.2%,-2.0 | -0.4%,-1.9 | UK / 8.30 | | Factory Orders (Aug) | 0.5%,-4.7% | -1.7%,-4.1 | GE / 10.00 |
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Currency Tech |
AUDUSD
R 3: 0.7944
R 2: 0.7818
R 1: 0.7743
CURRENT: 0.7321
S 1: 0.6990
S 2: 0.6776
S 3: 0.6715
EURJPY
R 3: 148.69
R 2: 146.85
R 1: 144.97
CURRENT: 139.98
S 1: 134.56
S 2: 133.53
S 3: 130.59
USDSGD
R 1: 1.4859
R 2: 1.4760
R 3: 1.4698
CURRENT: 1.4629
S 1: 1.4489
S 2: 1.4458
S 3: 1.4374
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Market Brief |
The Usd was slightly weaker in the Asian session, as an unexpected 100bp cut by the RBA helped spark risk taking. The EurUsd traded higher to 1.3618 from 1.3450, while the UsdJpy traded to 103.29 from 100.31. The AudUsd climbed to 0.7317, as the RBA action (expected 50bp) boosted traders hope that global central banks would start using interest rates to steady markets. In addition, the positive response in sentiment illustrates how effective these actions could be and builds a case for coordinated policy action. Earlier in the US session, the markets were entirely uninspired by the Fed's choice not to lower interest rates and, instead, just added more liquidity (intends to double the size of the Term Auction Facility (TAF). Wall Street witnessed another dismal day, with the S&P down 3.85%. However, we don't expect policy makers to sit idly by hoping that liquidity injections and the passage of the Emergency Economic Stability Act will solve all the financial sector's problems. We believe that central banks will follow the RBA's lead and begin to cut rates aggressively, including the Fed, which should end up around 1.25% (2.00% in the UK ). Asian equity markets are now trading lower, with the Hang Seng leading the losers at -4.96%. European stock futures are pointing to a mixed open. Volatility is still the name of the game, with the VIX trading at 52.05 and the strong correlation between Usd and volatility will keep the greenback firm.
The uncertainty in the Eurozone in the last few day has obviously hurt the Euro and highlighted which currency participants truly feel safe holding, but also the lack of unity among the Eurozone nations.
Despite the summit on Saturday, which held the possibility of a coordinated timely response (and the Ecofin group of finance ministers meeting last night), individual nations are still resorting to local solutions. This has encouraged a collapse of confidence regarding the Euro and concerns over the ability of the union to react in crisis.
The BoJ held rates at 0.50% in an unanimous decision, as was widely expected. In addition, the accompanying statement cautioned that the domestic Japanese economy would stay lethargic as "the slowdown in overseas economies become more evident". The BoJ statement also mentioned that the pressure on global financial markets has increased, with new financial institutions failures and lack of success from rescue plans.
With a real lack of timely, significant economic data, it will be another day of keeping one eye on the equity markets and the other on the news wires.
13.30gmt - ECB’s Trichet speaks at World Policy Conf.
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