News and Views: 29 July, 2008

Stocks in US were a disappointing lot on Monday, after the International Monetary Fund warned that credit conditions in the housing sector is going to worsen

Indices:

European markets:

Equities in Europe saw a crashing day yesterday, when banks fell weak with big losses in Credit Agricole and Societe Generale. The trigger was blown after Citigroup cut its rating on the European banking sector from 'neutral' to 'underweight', indicating more pain in the global economy. (source: sharecast.com).

David Buik of Cantor Index in London said: "There is a deep seated problem with many of these banks.  To call the bottom of the market without the odd little swerve is probably harsh. It's going to be quite a negative month. Write-downs, earnings downgrades, dividend cuts and capital raising are becoming the norm." A disappointing start in the US markets also brought lethargy during the European trading hours. (source: reuters.com).

Another analyst, Howard Wheeldon, a senior strategist at BGC Partners LP in London said in a Bloomberg Television interview, "If you're looking for good news from the banking sector I suggest you go on holiday because it is just not going to be there.'' (source: bloomberg.com).

 The UK's FTSE 100 slipped 0.8 percent. France's CAC 40 decreased 1.2 percent and Germany's DAX retreated 1.3 percent. (source: bloomberg.com).

US markets:

Stocks in US were a disappointing lot on Monday, after the International Monetary Fund warned that credit conditions in the housing sector is going to worsen and may prolong the economic slowdown. Ralph Shive, chief investment officer of 1st source Corp Investment Advisors in South Bend, Indiana said: "We're relatively bearish on financials because even when we get this crisis sorted out, the rebound is going to be muted. Everyone wants to declare the crisis over, but it's going to take a long time to dig out of this hole.'' (source: bloomberg.com).

Paul Nolte's comments showed uncertainty about the future. Notle, director of investments at Hinsdale Associates in Hindale, Illinois said:"It's all about financials right now. We saw a couple of small banks go 'belly up' over the weekend. Now people are wondering what's going to happen next and when." (source: reuters.com).

The Dow closed 239 points lower at 11,131, the tech dominated Nasdaq Composite was 46 lighter at 2,264, while the broader S&P 500 dropped 23 points to 1,234. (source: sharecast.com).

Asian markets:

Investors in Japan played the markets in a very cautious manner, choosing stocks carefully, and gained modestly. Bargain hunters but were careful not to go overboard ahead of the  economic data's due to be released in this week from Japan and the US.  (source: sharecast.com).

Elsewhere in Hong Kong, the Hang Seng lost after early gains despite gains from oil stocks. Oil refiner Sinopec, oil producer CNOOC and Petro China managed to recover from Friday's sell off. (source: sharecast.com).

The Nikkei 225 index closed up 19 points at 13,353 after a volatile session. The Hang Seng index closed down 53 points at 22,687. (source: sharecast.com).

Currencies:

On Monday, investors saw dollar slip against the yen after the better than expected US housing data did very little for the greenback amidst worrying and weak US economy. The euro too edged higher against the dollar brushing off a five year low German consumer sentiment data. Oil prices also rose yesterday. Marc Oswaid, strategist at Monument Securities said: "We have an absolute deluge of data this week ... The focus will be on how the data combines with oil prices and the equity market. The question will be at what point stronger data (will foster) the perception that the US economy is doing better than it has been." (source: reuters.com).

The euro was up 0.1 percent at $1.5728. The dollar edged up as high as 108.08 yen according to Reuters data. (source: reuters.com).

Commodities:

Oil:

Oil prices bounced back on Monday after sliding about $20 a barrel. The sudden rise in oil prices according to analysts is because of geopolitical disturbance in the east, more specifically, bomb blasts in India and Turkey. (source: reuters.com and ft.com).

Nymex September West Texas Intermediate rose $1.27 to $124.53 a barrel. (source: ft.com).

Gold: 

Oil's bounce back and dollar's slide, gold became the centre of attention again as a safe haven commodity. As US stocks weakened due to financial worries, gold's alternative investment appeal was boosted. (source: reuters.com).

Gold was at $928.45/929.65 by New York's last quote at 2:15 p.m. EDT. (source: reuters.com).

Bonds:  

Yields move inversely to bond prices

US Treasuries:

Rise in US Treasury debt prices on Monday again brought back concerns about the banking sector, triggered by sharp declines in stocks and investors running for cover towards government bonds. David Coard, head of fixed income sales and trading at the Williams Capital Group in New York, said:"Nervousness about the financial sector and what seems to be a general unease is helping to support a flight-to-quality bid here in Treasuries." (source: reuters.com).

The 30-year bond gained 1-6/32 in price for a yield of 4.61 percent. (source: reuters.com).

European Bonds:

Bonds in Europe advanced after the German consumer confidence report released yesterday showed a fall. Elwin de Groot, a market strategist in Netherlands at Rabobank Groep, said:"Macro data is taking a turn for the worse in Germany. The rapid deterioration still comes as somewhat of a surprise to the market. The list of negative shocks to the economy has expanded rapidly over the last 12 months.'' (source: bloomberg.com).

The yield on the 10-year German bund, Europe's benchmark government security, dropped 8 basis points to 4.52 percent. (source: bloomberg.com).

Economic Calendar - 29 July 2008:

N/A  Consumer Price Index (YoY) (Jul) - Germany: The Germany consumer price index released by the Statistiches Bundesamt Deutschland measures the average price change for all goods and services purchased by households for consumption purposes. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading is positive (or Bullish) for the EUR, while a low reading is negative (or bearish). Previous rate was 3.3%. (Medium volatility expected).

10:00am CBI Distributive Trades Survey - Realised (MoM) (Jul) - United Kingdom : The CBI Distributive Trades Survey released by the Confederation of British Industry is an indicator of short-term trends in the UK retail and wholesale distribution sector carries significant weight in the formulation of economic policy at the Bank of England and within Government. 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 -9. (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.)