News and Views: 20 August, 2008

US markets too hit a bad patch yesterday as credit worries hit financials and a report showed higher inflation which may remain a threat

Indices:

European markets:

European stocks lost heavily yesterday, after losses in US markets. A government report showed US wholesale prices rose in July which indicated how high inflation was. (source: reuters.com).

The German Dax closed 150 points lower at 6,282, the French CAC dropped 116 points to 4,332. (source: sharecast.com).

US markets:

US markets too hit a bad patch yesterday as credit worries hit financials and a report showed higher inflation which may remain a threat. Also fears that Fannie Mae and Freddie Mac's losses may create more problems for financials if the government does not make efforts to bailout investors bearing losses. This problem resurfaced after Freddie Mac, struggled to sell new debt. Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama, said: "The uncertainty with regard to financials has kept the downward pressure on. Home prices keep falling, assets continue to deteriorate, the economy continues to slow, which can only worsen the unemployment rate and increase delinquencies. There's seemingly no end to this cycle, and that's to the detriment of any financial stock." (source: reuters.com).

The Dow Jones industrial average fell 130.84 points, or 1.14 percent, to 11,348.55. The Standard & Poor's 500 Index slid 11.91 points, or 0.93 percent, to 1,266.69. The Nasdaq Composite Index lost 32.62 points, or 1.35 percent, to 2,384.36. (source: reuters.com).

Asian markets:

Nikkei was lower on Tuesday with financials going down. Hong Kong shares also closed down with bad results from financials. (source: sharecast.com).

The benchmark Nikkei 225 index closed down 300 points at 12,865. Hong Kong's Hang Seng index closed down 446 points at 20,484. (source: sharecast.com).

Currencies:

Commodities:

Oil:

Earlier, the Tropical storm Fay was not that much of a worry as reports from Mexico said the storm did not effect production installations in the Gulf of Mexico. But as the day went by investors worried about the impact on production due to the storm in the area, this took oil prices higher. (source: sharecast.com).

US September crude settled $1.66 higher at $114.53 a barrel in New York. (source: sharecast.com).

Gold: 

After a long time investors in commodities saw gold go up yesterday prompted by gains in commodities. Carlos Sanchez, precious metals analyst at CPM Group in New York, said, that gold was trying to mark a base between $780 and $800 and could move in this range in the near term. Bruce Dunn, vice president of trading at Auramet Trading in New Jersey, said:" I think there is still a lot of concern about the financial system as well, and that's contributing to gold as a safe haven." (source: reuters.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Government treasury bonds fell yesterday after a good offer of debt by Freddie Mac attracted investors away from the lower yielding US bonds. Sean Murphy, trader at RBC Capital Markets in New York, said:"Treasuries (came) under pressure; you had that agency deal and guys were more than happy to put that trade on." (source: reuters.com).

Benchmark 10-year Treasuries slipped in price for a yield of 3.84 percent. (source: reuters.com).

European Bonds:

After a series of gains seen by bonds, yesterday was a disappointing day, when government notes fell as Asian stocks rebounded from losses. Elwin de Groot, a market strategist in Netherlands, said: "The market is in correction mode after a sharp fall in yields. There is a feeling we are past the trough for the economy and that's helped overall sentiment.'' (source: bloomberg.com).

The yield on the 10-year German bund, Europe's benchmark government security, climbed 2 basis points to 4.19 percent. (source: bloomberg.com).