News and Views: 07 January, 2009

Indices:

European markets:

The new year gave a good start to the European markets which continued their rally despite poor economic data. An optimistic comment was seen coming from an analyst at Barclays Capital who said: "A ray of sunshine penetrating the recent storm clouds. Recent stability and gains in the equity market, combined with a rebound in commodity prices, suggest that the intense fear caused by the credit crunch in 2008 is subsiding.” He however also warned that it is too early to predict how the markets would be for the rest of the year. (source: ft.com).

Markets were also on the higher side over US President-elect Barack Obama's plans to come up with a rescue package as much as $775 billion over the next two years.  Germany also may be coming up with a stimulus package of upto 50 billion euros to save the economy. Bernard McAlinden, market strategist at NCB Stockbrokers said: "The main things are the Obama plans as well as the German fiscal stimulus package. Markets, rather than focusing on the dire economic and earnings data, are looking forward to the hope that these plans will work." (source: reuters.com).

The German DAX gained 42 points to 5,026 and the French CAC closed up 36 points at 3,396. (source: sharecast.com). The FTSE 100 index was up 1.9 percent. (source: reuters.com).

US markets:

US markets recovered on speculation President-elect of US Barack Obama may come up with a $775 billion package over a span of 2 years. (source: bloomberg.com).  Managing Director of stock trading at Nollenberger Capital Partners, Todd Clark in San Francisco, said: "There is a little bit of a honeymoon period with the ushering in of the new calendar year, people are anticipating bold initiatives in the stimulus package. It seems like there is some willingness to take risks again." (source: reuters.com).

The benchmark S&P 500 index overcame the previous session’s losses, up 0.8 per cent to close at 934.70. The Dow Jones Industrial Average rose 0.7 per cent to 9,015.10 and the Nasdaq Composite Index gained 1.5 per cent to 1,652.38. (source: ft.com).

Asian markets:

Rise was seen in the Japanese markets as commodities prices along with oil rose and yen weakened. It was a good trading day for exporters who found their products were competitive in the US with the yen's donwgrade. (source: ft.com).

Though shares in Hong Kong fell as investors preferred to sell shares heavily. (source: reuters.com).

The Nikkei closed 0.4 per cent higher at 9,080.84. The Hang Seng index closed 0.3 per cent lower at 15,509.51. (source: ft.com).

Currencies:

The dollar rose against the euro yesterday after reports trickled in that a drop in eurozone inflation may give the European Central Bank a reason to cut interest rates. According to an expert, Audrey Childe-Freeman at Brwn Brothers Harriman, said: "If the ECB does not cut in January, it will be behind the curve, with a need for more aggressive rate cuts later on. But if the ECB cuts rates next week, the euro yield advantage will diminish further and market participants will adjust to a more dovish rate profile for the ECB.” The dollar fell against the pound but gained against the yen. (source: ft.com).

The dollar rose 0.4 per cent to Y93.76. The euro was down 0.9 per cent to $1.3519 against the dollar. It had dropped 2.4 per cent to £0.9050 against the pound and lost 0.5 per cent to Y126.70 against the yen. (source: ft.com).

Commodities:

Oil:

Fighting in the Gazza strip between Israel and Hamas has shown no signs of a cease fire which has made matters worse for oil as it rose above $50 a barrel yesterday. (source: ft.com). Also OPEC indicated to implement production cuts. (source: sharecast.com).

Crude for February delivery closed 23 cents lower at $48.58 a barrel on the New York Mercantile Exchange. (source: sharecast.com).

Gold:

Dollar's strong stance against the yen and the euro took away gold's demand as a hedge against inflation. A research analyst at Commodity Warrants Australia, Toby Hassall said: "We had a bullish tilt towards gold through December but further strength in the dollar might see gold erod some of those gains." (source: reuters.com).

Gold for February delivery settled $8.20 higher at $866 an ounce on the Comex division of the New York Mercantile Exchange. (source: sharecast.com).

Bonds:   

Yields move inversely to bond prices
 

US Treasuries:

Amidst a weak economy many traders were suprised that notes which were proteced from inflation had huge demand. (source: reuters.com).

Benchmark 10-year yield was down 2.47 percent. (source: reuters.com).

European Bonds:

Yesterday, European bonds rose.

The yield on the 10-year German bund, Europe’s benchmark government security, down one basis point to 3.14 percent. (source: bloomberg.com). 

Economic Calendar - 07 January 2009:  

00.01am  Nationwide Consumer Confidence (Dec) - UK :   The Nationwide Consumer Confidence captures the level of confidence that individuals have in current and future UK's economy. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. A high reading is also positive for the GBP, while a low reading is negative.  Previous Rate:  50.  Consensus Rate:  -49  (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.)