Archive for March, 2008

At close of the market S&P 500 closed at 52 week low

Wednesday, March 12th, 2008

With the news of forced liquidations, true reports, and missed margin calls the treasury yields and S&P 500 slashed down to 50 week low. Yields of two year were slashed down to around 11.0 bps to 1.50 percent and yields of thirty year were down from 4.0 bps to 4.55. The contract of Eurodollar for the month of June increased up to 13.4 ticks to 97.62. It slashed from 29.32 points to12040.37. Dow Jones Industrial Average closed 214.57points to 12040.37. The NASDAQ crashed down 52.9 points to 2220.47. S&P TSX index of Toronto closed 234.6 points to 13369.22.

Some of the prior jobless assertions, incomplete home sales, and sales of the chain store were included to the different American economic indicators and they were all quite good. Some of the market analysts have reacted to the news that one of the mortgage fund Carlyle Capital Corp have failed four of the margin calls and possess more than twenty billion dollars as liability that has been subjected by Freddie Mac and Fannie Mae of GSE.

The equity and the fixed income cemented the rumors which stated that Fannie and Freddie would be granted straight government obligation debt from the American government. Mr. Richard who is a government bond strategist with BNP Paribas said that the panic was created in the mortgage market.

He also added that it all goes to show that mortgage market is not in a good position and there is not enough liquidity and also the hedge funds. Ivey Purchasing Managers Index is the latest one that is main release in Canada. Earlier in the last month it was anticipated a little weaker at 56.0 mark but landed up to 62.0.

The dollar of Canada slashed down to a quarter cent which is ahead of the figures those were projected by Ivey. Against the USD the dollar of Canada slashed down to 0.20 cents to 1.0136. Canadian fixed income didn’t give much importance to the figures issued by Ivey and the main spotlight was on data related to the Canada’s payroll. The bonds of the Canadian government also slashed down 11.0 bps to 2.52 percent. Bank of England, Overseas, and Central Bank took a decision for not making any changes in the rate of interest.

The amazing journey for the euro continues and after the verdict of ECB for not making any changes in the rates which was aimed at taking the currency downward. In the press conference Mr. Trichet was repeatedly questioned about the euro the American officials prefer the dollar. Mr. Trichet commented that euro increased of 1.5371 to 0.705 as compared to the American dollar. The euro has increased 932 pips and it is an increase of about ten cents.

At the time of closing of European stock market Eurostoxx was down at 50.76 points to 3088.00, Britain’s FTSE was hundred down to 87.09 points to 5764.40, DAX of Germany down to 90.38 points to 6590.30. As for two years returns of Germany Bunds were up by 4.2 bps to 3.29 percent. For the yields of Britain they were down at 1505 bps to 3.88 percent.

Canada’s Employment moves strongly as compared to American

Wednesday, March 12th, 2008

It was a surprise that the administration of Canada opened more than forty three thousand jobs in the month of February as on the contrary the American data showed a downfall of around sixty-two thousand jobs in the month of February. As per the expectations of the analysts the market of Canada’s employment for consecutively second month of February totaling of more than forty three thousand new job openings which was around fifteen percent consent by the experts.

Profits were also increased after the growth of more than forty-five thousand jobs in the month of January. With this the number of jobs for the past twelve months grew to more than forty-six thousand. Going according to the agreement the estimate made by the experts was a gain of more than two thousand jobs in the month of February. Mr. Douglas who is a Deputy Chief Economist with BMO he was of the view that the report came as a surprise and there is no worry to be made for the Canada’s domestic economy. 

On the contrary the employment data of America showed a downfall of more than sixty-two thousand for the month of February. The job figures for the month of January underwent a modification with the previous loss of around sixteen thousand jobs to the loss of more than twenty thousand jobs. It was also noted by the report that more than forty-five thousand jobs were formed in the month of December.  

The outstanding amount in The Term Auction Facility was raised to hundred billion dollars on Friday by Federal Reserve. More than forty billion dollars was raised in the auction respectively on March 10 and March 24, it is an increase of twenty billion dollars from the amount that was declared on February 29th. In a press note it was said that Federal Reserve will persist on with the auction sizes as per the guarantee and at least for six months the auctions will be continued.

American economy might require extra motivation to boost up the financial policies of Federal Reserve for increasing slow economic condition. R. Swagel who is the Treasury’s Assistant Secretary told the reporters that although nonfarm labor is poor for the month of February and the American economic basics are healthy.

According to a document released by Canadian Federation of Independent Business the owners of Canada are facing difficulties for finding workers to work on a routine basis. According to the Federation last year for four months majority of the jobs remained vacant and the employers had to face botheration in filling the vacancies. 

There were so many statements released and the speakers from European Central Bank and Federal Reserve gave their expert comments during the conference at Bank of France on the rising prices and globalization. Mr. Noyer who is Governor of Bank of France said that every country is facing the problem of inflation which has become a main hindrance in the growth.

Record High for EUR/USD

Wednesday, March 12th, 2008

EURUSD has reached to new heights as the pair will be reaching the landmark of around 1.5298. It is a big step when it is compared to the sudden price change where the dollar was struggling for its re-existence. The start of New York’s session quickly overcome with this attempt when it was realized the economic records generated fear that the consumer sector is no more concerned with the employment.

The American labor market data of February has really affected the report of Friday’s non-farm payroll. The reduction in the jobs was more than eleven percent and it showed that the working staff is not reduced by the companies. The fact cannot be denied that products those are related to the service segment witnessed a layoff as the government and non-profit organizations showed a rush.

It was not at all expected that the report of ADP employment will register a downfall of more than twenty thousand and it is the worst reading since June in 2003. It was evident that the goods and services segment witnessed considerable losses. The service segment to employ new employees but it is making progress at a very slow speed. It does not promise the employment of ISM non-manufacturing index and not for the NFP release on Friday.

The reduction in the employment will only add on to the already worsened American economy. ISM manufacturing gauge recorded the downfall that is the worse in the previous four years and the service segment reported deeper concerns. The print of 49.3 was registered a two point high than the standard point of around 4.6, this is a improvement as compared to the readings of the month of January which is known as the worst reading since 2001.

The world’s biggest economy is in depression and they are just waiting for a word from government’s GDP. After the ISM report came there were certain developments made while some of the developments were reducing. A significant development was detected in the business. This shift is suggestive of the inventory in the same period and the readings of the new orders and the employment were also reducing and not at al impressive.

It was a sudden surprise that the export orders shot down to more than 45 percent and the new dollar provided the reduction to the foreign consumers. Now when EURUSD has been making indecisive moves in getting further to the mark of 1.5298, the basics offer to additional worsening of the American dollar. The experts are not denying the fact for making further developments in the same area that the basics are also favorable. 

Euro Surpasses Dollar

Wednesday, March 12th, 2008

As compared to the weaker American dollar the Euro registered a hike of around 1.538 The ECB probably will be keeping the interest rates at 4.00 pct Mr. Jean will also be discussing the risk aspects of rising prices. With the rise of the energy prices it advocates that increase of the consumers will continue to quickly rise in the euro zone. There was probability that ECB will be deserting their headline rates and it remained unaffected.

Mr. James who is an analyst with CMC Markets was of the view that if there is a relaxation in the monetary policies in Europe then it seems that it will remain for sometime. When compared the data available with ADP showed that during the month of February companies of American private sector has terminated more than twenty thousand jobs and it only has worsened the issue that is mainly related to the American economy. It also suggested that Federal Reserve will be reducing more interest rates.

Mr. James was of the view that with the help of overnight trade for Euro/dollar has touched than 1.50 level and it was also assisted by the American low economic condition and it has increased the pressure on Fed to decrease the rate in the FOMC meeting.  

The data of non-farm payroll of America will be closely monitored and if the American economy’s condition remained the same i.e. weak then it will not be a good sign for the dollar and can bring future losses. On the other hand the pound also gained as compared to the dollar getting close to the two dollar level. The fact cannot be denied that it remained below the euro.

Keeping in view the inflation the again the worries for the economy has showed up and around 5.23 pct of the interest rate was also fixed by the Bank of England. Until the month of May most of the market analyst said that necessary steps would be taken for further cutting of the rate of interest. 

Mr. James was of the view that the inflation will be a matter of great concern for Bank of England but the rumor that has been going for a while in the direction of quarter point in the second quarter. It would not be possible for Bank of England to sustain a dovish position after the next rate cut and it is well maintained by the dollar.

There is also bad news from Britain housing market where Halifax reporting a fall in the prices by around two percent in the month of February.