Credit Woes And Weak Economic Data Spark Selloff In Financial Markets
Credit Woes And Weak Economic Data Spark Selloff In Financial Markets Market Brief
The dollar strengthened across the board as the financial markets were overwhelmed by the siege of risk aversion. The EurUsd fell over 120pips falling below 1.30 to the low range of 1.29, while the UsdJpy dropped 113pips finding support at 98. The GbpUsd experienced a steep drop of 260pips to 1.45, this pair was one of the most deeply affected by the rush back into secure assets. The equity markets collapsed in the US and and Europe, with the Dow losing 3.56% or 289pts and the DAX retreating 4.07% or 190pts. Bond prices rose as investors sought protection from today’s unwind in risk, the 10yr and 30yr points in the curve declined 10bps respectively. On the commodities front, oil tumbled nearly 10% to $45bbl while gold rose a bit over 1% to $884ozon safe-haven demand.
Corporate earnings continued to outperform expectations, but results were overshadowed by weak economic data and credit concerns. Bank of America reported a rise in net income from $1.21 to $4.25Bln, but the announcement was overshadowed by an allocation of $6.4Bln to cover loan losses. In addition to the news regarding financials, leading economic indicators came in slightly worse than expected at -0.3% vs. -0.2% est. A growing consensus of market participants are beginning to believe the global recession will carry into the 2nd half of 2009. The FX market pointed to a selloff in US equities, as the Aud and Nzd were lower by over 100pips in the Asian session. Two key points investors will be looking for is transparency and consistency, which has been a difficult task for the ECB. The Euro suffered steep losses which were in-line with the overall trend of risk aversion, but I would contend the division among the central bank has put a pessimistic outlook on the expectations for a Eurozone recovery. We remain bearish on the Euro and concerned regarding the Gbp as the recession is deep in both territories, but the BoE has been a more aggressive in addressing the UK economic situation
ACM FOREX
Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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