Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Breaks Psychological 700 Level on S&P Index

Stock-Markets / Financial Markets 2009 Mar 04, 2009 - 04:38 AM GMT

By: PaddyPowerTrader

Stock-Markets Best Financial Markets Analysis ArticleAfter a big fall in the previous sessions, traders sometimes look for a turnaround of up to 50% of the previous days drop or even a dead cat bounce. But despite the five day drubbing there was no such relief yesterday as the Dow Jones lost another 0.55%.


Tarnished conglomerate GE was the biggest drag, down 7.8%, as CDS (credit default swaps) spreads on their massive debt widened. They require money down upfront now and not just an annual premium due to the perceived heightened risk of default. Swiss bank UBS also put out a note earlier in the day saying they may need to raise what would be expensive additional capital. Other factors weighing on the market sentiment included Bernanke's sobering downbeat testimony, yet more dire housing data (pending homes sales at a record low) and awful car (wreck) sales (at a 17 year low). S&P cut Bank of America's credit rating by a notch to A and left them on negative outlook while, after hours, Google CEO described the economic situation as “pretty dire”. On the positive side, American Express climbed 6.9%, amid hopes that the TALF plan will help ease the credit-card company's pain.

Today's Market Moving Stories

  • More Budget Blues on the way so put another zero on it. The Chairwoman of the FDIC (Federal Deposit Insurance Corp) Shelia Bair has warned that “the deposit insurance fund may become insolvent this year” due the sharp increase in bank failures. The invisible man, US Treasury Secretary Tim Geithner , warned that the bank rescue program may cost more than the $700bn Congress has approved.
  • Some good news from China overnight. The manufacturing PMI in February rose to 49 from 45.3, the third consecutive increase, sustained by solid gains in output and new orders. Both are now above the 50-threshold. This is of course if one believes the official figures. Separately the country's PM Wen Jiabao will announce new stimulus measures tomorrow . Together with a further weakening of the Yen, this has allowed regional Asian markets to push ahead overnight. Japanese press reports that China, via the CIC, is mulling over whether to buy commodities and crude oil as a hedge by diversifying some reserves away from US government Treasury bonds. They are also said to be increasing their stakes in banks which may party explain the surge in Chinese equities overnight (up 6%). We may see some spill over joy in European stocks this morning. Indeed Rio Tinto and BHP Billiton are opening up on these stories.
  • The Markit iTraxx Crossover Index , a closely watched gauge of sentiment in the credit markets, hit the highest level in its five-year history , implying that a record number of sub-investment grade companies in Europe are edging towards being unable to meet debt obligations.
  • Northern Rock revealed that 170,000 of its 590,000 customers were in negative equity by the end of 2008, a statistic likely to have worsened over the last two months.
  • Irish life and Permanent net profit was down 89% year on year to €49m with weaker investment income and bad loan provisions (€204m of provisions includes €122m with respect to Icelandic exposure / Lehman's. They also took a €170m goodwill impairment charge from the TSB Bank acquisition back in 2001.) They expect 2009 to be profitable, albeit with credit impairments expected to double from 2008 level and sales volumes in life insurance to decline again. Overall, a poor set of numbers.
  • Glanbia's results came out in line with expectations but they remain (wisely) very cautious about the outlook with EPS growth in the low single digits. They need a good performance in Optimum Nutritions (Seltzer) to drive cashflows in 2009 and beyond, as the troublesome milk sector is at 30 year lows in terms of returns.

UK To Start Quantitative Easing Tomorrow
The Bank of England MPC begins its two-day monetary policy meeting today. There are probably written letters going back and forth between the central bank and Treasury on the subject of quantitative easing (QE). As well as voting on the level of interest rates (expectations are broadly for 50bp cut), the MPC will also be voting for the first time on the implementation of QE. I suspect with rate cuts nearly over that there should not be much resistance on the committee towards QE.

Judging from governor King's comments last week, I don't think the Bank of England are targeting a specific gilt (UK government bond ) yield or mortgage rate, but rather wants to get cash into the banking system to free up lending while it also continues to credit ease through it's Asset Purchase Programme. I think QE would be easiest to implement by buying front-end gilts , at least from an unwinding perspective further down the road. This logic could partially explain yesterday's strong three year gilt auction. The time for caution seems to be well and truly over. They need to throw the kitchen sink at it now.

Note even the ECB is catching the bug as Trichet is quoted as saying yesterday that they can at any time apply “non standard measures if appropriate”. One only wishes he'd put his money where his mouth is before it's too late for the PIIGS.

Data And Earnings Today
Today's main source of scheduled newsflow is the US ADP employment number at 13.15 which serves as a precursor to Friday's biggie, the non-farm payrolls release. It should confirm further deterioration in the US labour market, with consensus for employment to fall by 630k. The ISM non-manufacturing figure is expected to remain at around recessionary levels of 41.0 at 15.00. At 19.00 we get the Federal Reserve Beige Book which is an anecdotal survey of the 12 districts and should make for more grim, grey and gloomy reading.

UK prime minister Gordon Brown will address a joint session of Congress this afternoon.

Earnings today from BJ's (expected EPS $0.86c), Costco ($0.59) and Toll Bros ($-0.53).

Zero Dollars

And Finally… Legendary Trader Jim Rodgers Advises To Get Into Farming

Disclosures = None

By The Mole
PaddyPowerTrader.com

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in