News and Views: 25 August, 2008

On Friday Lehman Brothers attracted two major investors boosting the markets and financial stocks

Indices:

European markets:

Shares in Europe gained on Friday as financial stocks rallied after US stocks showed them the way upward. Lehman Brother sought to sell up to 50 percent stake to CITIC Securities, China's biggest brokerage or Korea Development Bank, giving investors hope of a good buy out. A trader also added,: "There is hope now that the financial crisis is not that bad after all and that we will all be rescued." (source: reuters.com).

Around Europe, the UK's FTSE 100 index was up 1.6 percent, Germany's DAX index rose 1.2 percent and France's CAC 40 added 1.3 percent. (source: reuters.com).

US markets:

Friday was a good day to end the week with gains in all the 3 major stock markets in US. Investors are looking towards the government and the Federal Reserve to resolve Fannie Mae and Freddie Mac's credit crisis problem. John Scholoegel, vice president of investment strategies for Capital Cities Asset Management in Texas, said: "Look for the Fed and Paulson to take steps on Fannie and Freddie -- the time is ripe. The market wants resolution here."  On Friday Lehman Brothers attracted two major investors boosting the markets and financial stocks. Oil price dip also gave relief from inflation related worries. (source: reuters.com).

The Dow Jones industrial average was up 196.79 points, or 1.72 percent, to end unofficially at 11,627.00. The Standard & Poor's 500 Index was up 14.45 points, or 1.13 percent, to finish unofficially at 1,292.18. The Nasdaq Composite Index was up 34.33 points, or 1.44 percent, to close unofficially at 2,414.71. (source: reuters.com).

Asian markets:

Asian markets, especially the Nikkei retreated after dollar became weak against the yen, damaging exporting companies. US financial sector health has gone all the way to to effect Japanese Financial sector too. (source: sharecast.com).

Japan’s Nikkei 225 index fell 86 points to close at a five-month low of 12,666. Trade in Hong Kong was halted after Typhoon Nuri headed towards the city. (source: sharecast.com).

Currencies:

Dollar was taken by surprise on Friday when it lost against the euro and the yen after investors reacted to Federal Reserve's Chairman Bernanke. Ben Bernanke said that 'a stable currency and a decline in commodity prices should help slow inflation this year and next.' His remarks diminished dollar's appeal to global investors as an interest rate hike expectations may be imminent. (source:reuters.com).

The euro rose as high as $1.4835 against the dollar from $1.4815 before Bernanke's remarks. Against the yen, the dollar held gains at 109.97 yen. (source: reuters.com).

Commodities:

Oil:

Oil rebounded on Friday after a series of declines, price of oil was back above $120 a barrel as tensions between the US and Russia escalated. Trouble started when the NATO declared there would be no 'business as usual' with Russia unless it withdraws its troops from Georgia, to this the Russian government said that it was suspending all military co-operation with the NATO. The Russian commander General Vladimir Boldyrev pointed out that their troops will be withdrawn from the region in the next ten days. (source: sharecast.com).

Crude for October delivery rose to its highest level since 4 August, climbing $5.62 to $121.18. (source: sharecast.com).

Gold: 

With oil's rise on Friday, and dollar's retreat, gold moved higher. Short-sellers rushed to close their positions and lock gains. (source: sharecast.com).

Gold for December delivery closed $22.70 higher at $839, its highest level since 8 August. (source: sharecast.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Government bonds in US lost steam after stocks rallied to usher investors away from the safe haven investments. William O'Donnell, head of US interest rate strategy at UBS Securities LLC in Connecticut said: "What is good for stocks is bad for bonds." Another analyst, a senior bond strategist, Josh Stiles, said: "The market unwound the flight-to-quality trade that had been based on concerns about the mortgage agencies." (source: reuters.com).

Benchmark 10-year Treasuries yield rose to 3.87 percent. (source: sharecast.com).

European Bonds:

On Friday, European bonds also fell when investors moved away from the safety of bonds to reap gains in stocks. Investors were also concerned about the European Central Bank's possible plan to raise rates to curb inflation. (source: sharecast.com).

The yield on a 10-year bund rose seven basis points to 4.25%. (source: sharecast.com).

Economic Calendar - 25 August 2008:

14:00pm  Existing Home Sales (MoM) (Jul) - : The Existing Home Sales, released by the National Association of Realtors, provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. A high reading is positive for the Dollar, while a low reading is negative. Previous rate was -2.6%. (Low volatility expected).

22:45pm  Trade Balance (Jul) - New Zealand: The Trade Balance released by the Statistics New Zealand is a measure of balance amount between import and export. A positive value shows a trade surplus while a negative value shows a trade deficit. Any variation in the figures influences the domestic economy. If a steady demand in exchange for exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the NZD. Previous rate was -223M. (Low 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.)