News and Views: 19 August, 2008

European markets declined on Monday as mortgage fears resurfaced

Indices:

European markets:

European markets declined on Monday as mortgage fears resurfaced. Oil prices also bounced back a little to give investors a run for their money. Henk Potts, a strategist at Barclays Stockbrokers, said: "The oil price is very important and is indeed part of the reason why we've seen investor sentiment look a bit stronger over the course of the last few weeks. Short term it is still a pretty negative picture of slowing economic growth, which continues to be a factor." (source: reuters.com).

Across the markets, the German Dax fell 13 points to 6432 with the French CAC down 4 points to 4448. (source: sharecast.com).

US markets:

Markets in US fell sharply on Monday as dollar weakened a little along with financials which fell after more bad news trickled from Fannie Mae and Freddie Mac. (source: sharecast.com).

Dow Jones finished the day 180 points lower at 11,479, the tech laced Nasdaq Composite shed 35 at 2,416, while the broader S&P 500 fell 19 to 1,278. (source: sharecast.com).

Asian markets:

The Nikkei rose on Monday with exporters such as Sony rising after a weaker yen and strong dollar. The Hang Seng also fell as shares in Foxconn International dived after a profit warning. (source: sharecast.com).

The benchmark Nikkei 225 closed 146 points higher at 13,165. The Hang Seng index closed down 229 points at 20,93. (source: sharecast.com).

Currencies:

Dollar on Monday did not rise much as oil recovered a little. Chris Turner, ING head of FX research, said: " The dollar seemed to overshoot the macro adjustments last week... with the massive liquidation in the commodity markets. But we're seeing some signs of stability there and second thoughts about how far oil will fall is allowing the dollar to take a breather." (source: reuters.com).

The euro fell to a six-month low of $1.4645 on trading platform EBS in early Asian trade before recovering to $1.4712. (source: reuters.com).

Commodities:

Oil:

Oil settled lower on Monday as investor's worry about Tropical storm Fay disrupting installations in the Gulf of Mexico eased. But the storm missed major production areas. (source: sharecast.com).

US crude for September delivery settled down 90 cents at $112.87 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Gold fell amidst fall in oil and rise in dollar. The NAHB/Wells Fargo housing confidence index for August stayed at a record low of 16, equivalent to July's reading. (source: sharecast.com).

Precious metals made a recovery Monday with gold for December delivery rising $13.60 to close at $805.70 an ounce on the New York Mercantile Exchange. (source: sharecast.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

US Treasury debt price also rose on Monday, due to falling stocks. Falling energy prices also lifted bonds by soothing fears of an interest rate rise to fight inflation. David Coard, head of fixed income sales and trading at Williams Capital Group in New York, said: "You have stocks selling off and concerns continuing about the health of financial companies, and this stokes the flight-to-quality bid for Treasuries." (source: reuters.com).

Benchmark 10-year Treasuries traded higher in price for a yield of 3.82 percent. (source: reuters.com).

European Bonds:

Bonds in Europe rose again for the fifth day yesterday, ahead of the ZEW Center for European Economic Research's index of investor and analyst expectations. Wilson Chin, a fixed income strategist in Amsterdam at ING Bank NV, said: "There might be slight improvement in the survey today, but the overall economic fundamentals remain weak. We favor European bonds over U.S. Treasuries.'' (source: bloomberg.com).

The yield on the 10-year note fell 1 basis point to 4.12 percent by 8 a.m. in London. (source: bloomberg.com).

Economic Calendar - 19 August 2008:

04:00am  BoJ Interest Rate Decision - Japan: BoJ Interest Rate Decision is announced by the Bank of Japan. If the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish. Previous Rate was 0.5%. (High volatility expected).

12:30pm Housing Starts (YoY) (Jul) - United States : The Housing Starts released by the US Census Bureau is an indicator that tracks how many new single-family homes or buildings were constructed. For the survey each house and each single apartment are counted as one housing start. The figures include all private and publicly owned units. It indicates movements of the US housing market. A high reading anticipates positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish). Previous rate was 1.066M. (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.)