News and Views: 06 October, 2008

Markets in Europe rose after a long and depressing session since 2 weeks

Indices:

European markets:

Markets in Europe rose after a long and depressing session since 2 weeks. Financial markets steadied after Wells Fargo agreed to buy rival Waschovia without taking help from the Federal Reserve.  Markets went higher also on speculation that the Bank of England may offer three-month loans against an even wider range of collateral. (source: ft.com).

The FTSE 100 closed up 2.3 per cent, rising 109.91 to 4980.25. (source:ft.com). the Frankfurt rallied 136 points to end the week at 5,797, the French Cac added 117 to 4,08. (source: sharecast.com).

US markets:

Unlike the European markets, US stocks plunged to a 7 year low as investors feared the $700bn rescue plan still may not be able to unblock credit markets and wade off US recession. But the bill was eventually approved in the US House of Representatives on a second try and President George W. Bush signed it into law. (source: reuters.com).

Anthony Conroy, head trader for BNY Convergex, an affiliate of the Bank of New York, said: "There's just a tremendous amount of anxiety out there and that's breeding volatility. People are concerned that the bailout won't unlock the credit markets, so people are taking a hard look at things. The economic data in the past few days has been bad and the outlook for earnings is fairly bleak. We got over one major hurdle with the rescue plan, but there's more to go." (source: reuters.com).

Dow Jones closed down 157 points at 10,325. Nasdaq shed 29 at 1,947 and the S&P 500 lost 15 at 1,099. (source:sharecast.com).

Asian markets:

Markets in Asia also dipped on Friday as investors worried about the US economy which is having an impact on the Asian markets too. (source: sharecast.com).

Poor results of US factory orders and unemployment also was behind the decline. (source: ft.com).

The Nikkei 225 average closed 1.9 per cent lower at a three-year closing low of 10,938.14. The Hang Seng index closed 2.9 per cent lower at 17,682.40. (source: ft.com).

Currencies:

Dollar was again ahead of all major currencies, especially higher against the sterling. Data from Uk manufacturing and service sectors were lower than expected hinting trouble in the economy. Adding to this piece of information, Hans Redeker at BNP Paribas, said: "This suggest not only are UK households unable to withdraw equity, but are in fact repaying debt, confirming the bleak outlook for the consumer. We expect sterling to remain under pressure.” (source: ft.com).

The pound rose 2 per cent to £0.7768 against the euro. (source: ft.com).

Commodities:

Oil:

Crude oil went lower on Friday as dollar strengthened and investors worried about economic downturn. (source: sharecast.com).

Crude oil for November delivery fell $4.56 to close at $93.97 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Gold was moderately lower on Friday, as investors were waiting for news to trickle in from US over the fate of the bail-out plan, and eventually when the news broke that the bill has been passed, gold remained lower despite a lower dollar against the euro. Some analysts said that the low trading on gold could also be cause of many players exiting gold market on Thursday's trading day itself ahead of the bail-out result. (source: reuters.com).

Scott Meyers, Pioneer Futures Inc, senior trading analyst in New York, said: "I think people who wanted to get out got out already. They postured themselves ahead of time, because they thought the bill was going to pass and it did. There's no reason for further flight to quality if you feel the bill is going to pass." (source: reuters.com).

The December contract losing $43 to close at $844.30 an ounce on the Comex division of the New York Mercantile Exchange. (source: sharecast.com).

Bonds: 

Yields move inversely to bond prices

US Treasuries:

Treasuries declined on Friday despite fall in equities, as investors are expecting a huge cut in interest rates by the Federal Reserve. (source: reuters.com).

Benchmark 10-year yield rose to 3.640 percent. (source: reuters.com).

European Bonds:

European bunds were flat on Friday, as European stocks rose on hopes the European Central Bank may cut interest rates in the near future.  (source: sharecast.com).

The yield on a 10-year bund was down two basis points at 3.92%. (source: sharecast.com).

Economic Calendar - 06 October 2008:

N/A  Halifax House Prices (MoM) - UK: The Halifax House Price Index released by the HBOS is the UK's longest running monthly house price series presents house prices and property price movements on a like-for-like basis. The housing prices are considered as a key indicator for inflationary pressures. A high reading is seen as positive (or bullish ) for the GBP, while a low reading is seen as negative (or bearish). Previous Rate: -1.8%. Consensus Rate: N/A. (Medium volatility expected).

14:00pm  Ivey Purchasing Managers Index (Sep) - Canada: The Ivey PMI released by the Richard Ivey School of Business captures business conditions in Canada. The Ivey PMI is an important indicator of business conditions and the overall economic condition in Canada. A result above 50 signals is seen positive , or bullish for the CAD, whereas a result below 50 is seen as negative, or bearish. Previous Rate: 51.5. Consensus Rate: N/A. (Medium volatility expected).

Recent Market Action:

Sources include: Bloomberg.com , Reuters.com, Fxstreet.com and FT.com

(Any opinions expressed in these updates do not reflect the views of the company, and as such should not be taken as trading advice.)