News and Views: 21 August, 2008

Dollar remained firm against major currencies on Wednesday

Indices:

European markets:

European markets remained volatile, but gained during midday trading with help from miners and oil stocks, though banks fluctuated a lot. Markus Wallner, strategist at Commerzbank in Frankfurt said: "We remain underweight in banks. We have seen that some investors switched from commodities into banks but that only really worked for two weeks. The credit crunch is definitely not over." (source: reuters.com).

Germany's DAX index was up 0.5 percent, UK's FTSE 100 index up 0.8 percent and France's CAC 40 up 0.6 percent. (source: reuters.com).

US markets:

Stocks in US rose on Wednesday as bank and energy shares reiterated as investors did not pay much attention to Fannie Mae and Freddie Mac on fear the government may bail them out. Eric Kuby, chief investment officer at North Star Investment Management in Chicago said: "Going into the day some reasonably good earnings gave us a positive bias, and also it seems to me that the commodity stocks, which have been pretty beaten up, are having a very strong rebound. But this may be just bargain hunting, as I haven't seen any economic numbers that would be driving this." (source: reuters.com).

The Dow Jones industrial average was up 68.88 points, or 0.61 percent, at 11,417.43. The Standard & Poor's 500 Index was up 7.85 points, or 0.62 percent, at 1,274.54. The Nasdaq Composite Index was up 4.72 points, or 0.20 percent, at 2,389.08. (source: reuters.com).

Asian markets:

Markets in Asia were lower after a volatile trading day, as concern about the underlying health of the US economy resurfaced. The Hang Seng however rose amidst an optimism that the Chinese government will pump as much as 400 billion yuan into the economy to boost growth. (source: sharecast.com).

Hong Kong's Hang Seng index closed up 446 points at 20,931. (source:sharecast.com).

Currencies:

Dollar remained firm against major currencies on Wednesday. The ZEW index, which measures economic sentiment, improved slightly but remained negative. It came in at negative 55.5 points from negative 63.9 points. Another German report showed the country’s wholesale inflation rate rose to 8.9% in July. (source: sharecast.com). 

Commodities:

Oil:

Oil closed higher after a volatile day yesterday after weekly government supply data showed bigger than expected increase in crude inventories. Crude supplies rose by 9.4m barrels to 305.9m. Analysts had predicted a rise of around 1.7m barrels. (source: sharecast.com).

Crude for September delivery finally settled 45 cents higher at $114.98 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold: 

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Treasuries in US rose on Wednesday as investors moved towards safe haven investments amid rising fears Fannie Mae and Freddie Mac may be bailed out by the government. Mary Ann Hurley, vise president of fixed income trading at D.A. Davidson & Co in Seattle, said:"You are seeing continued flight-to-quality (buying of bonds) over concern with what is happening to Fannie and Freddie." (source: reuters.com).

Benchmark 10-year Treasuries yield fell to 3.81 percent. (source: reuters.com).

European Bonds:

Bonds again fell after the PMI (Purchasing Manufacturing Index) rose unexpectedly in the euro region. Peter Mueller, a fixed income strategist in Frankfurt at Commerzbank AG, said: "The expectation that the ECB will hurry with rate cuts is dampened by this stabilization of PMI, which is negative for the market. Also, the market is very expensive at these levels.'' (source: bloomberg.com).

The yield on the German bund, Europe's benchmark government security, rose 2 basis points to 4.15 percent. (source: bloomberg.com).

Economic Calendar - 21 August 2008:

07:30am  Purchasing Manager Index Manufacturing (Aug) - Germany: The Manufacturing Purchasing Managers Index (PMI) released by the NTC economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in Germany. A result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish. Previous rate was 50.9. (Medium volatility expected).

08:30am  Retail Sales (MoM) (Jul) - United Kingdom: The retail Sales released by the National Statistics measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. A high reading is seen as positive, or bullish for the GBP, while a low reading is seen as negative or bearish. Previous rate was -3.9%. (Medium volatility expected).

23:50pm BoJ Minutes - Japan : The Bank of Japan publishes a study of economic movements in Japan. It indicates a sign of new fiscal policy. Any changes in this report tend to affect the JPY volatility. If the BoJ minutes show a hawkish outlook, that is seen as positive (or bullish) for the JPY. (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.)