The financial markets have been caught by fears of a US recession and a worsening of the problems in the financial sector. We can take a look the most recent events that have led to this situation.
On Thursday 17, Mr Bernanke asked for the help of the US Administration in his speech at the Senate. This movement was seen by many analysts as a sign of weakness, interpreting that the Fed cannot take control of the actual US economic state.
But the strongest day was on Friday 18, when US president, Mr. George Bush, tried to launch an economical recovery plan. This plan consisted in a USD140.000 million stimulous plan to rescue the damaged economy, a number that stands for more or less the 1% of the US GDP. Markets reacted really bad to this proposal, seeing it as a 'too-late' solution (they see the Administration going behind the economy, not anticipating it), falling down sharply.
The last act of this play came on Monday, with (luckily?) the US Market closed. In Europe all of the floors panicked, falling a huge 5% to 8%.
Though purely under numeric conditions there's no real recession at the US, if we talk of psychological conditions we are clearly into it.
One of the most risky solutions goes through the Sovereign Funds. As Tony Juste, FX Advisor at FXstreet.com, says: "The interest of the Chinese government to keep the situation relatively calm before the Beijing Games should push for a massive injection of liquidity to keep things up, and a first proof of that was seen today in early European trade."
In order to try to avoid this recession, the Fed has cut its interest rate 75bp, to 3.50% in an unexpected move.
- · Review the opinion of the experts at the Analysts or Authorities Comments and check the movements of the indices in our World Indices section. But if you need even more information take a look to the Advisor Blog, from Tony Juste.
- · More information in our Spanish website: Cobertura especial - Lunes negro para las bolsas mundiales.
In-Depth Analysis
- · Daily Forex News - Fed's rate cut did little against fears of a Global recession by ACM - Advanced Currency Markets
- · Daily Market Briefing - Where to Park Your Dollars During a Recession by FXCM
- · FX Crossroads - USD, recessions, and Fed easing cycles by Danske Bank A/S
- · Recession: The Measure of Economic Weakness by Wachovia
- · KBC News Picks - US: CNAI points to US economy entering recession by KBC Bank
- · Overnight Briefing: Far East Timezone - Still worries in market by Jyske Bank
- · The Daily Metals Report - Investors sold commodities to cover losses in equity markets by Saxo Bank
- · The Daily Energy Report - Oil could not resist the broad panic sell-off on Equity by Saxo Bank
- · Global: More uncertainty in financial markets by Danske Bank A/S
- · Forex Daily Analysis - 22/01/'08 - US Equity Market Falls by ForexYard
- · Market Session Snap-Shot - Asian Session - Equities Sell Off Continues by ACM - Advanced Currency Markets
- · Sunrise Market Commentary: Currencies - EUR/USD extends correction on global market turmoil by KBC Bank
- · Commodities Morning Briefing - Focus on equities by Jyske Bank
- · Start the Day - World economy in a serious situation by Mizuho Corporate Bank
- · Wakeup Call on Forex Markets - Stocks in massive drop across the board by Saxo Bank
- · Outside the box - Words from the wise for the week by Millennium Wave Investments
- · Dynamic Carry Basket - Carry Conditions Worsen As Equity Markets Print Worst Drop In Years by FXCM
Related News
- · US dollar lower against euro, sterling in Sydney on recession fears (Thomson Financial News)
- · Oil edges lower as US recession fears persist UPDATE (Thomson Financial News)
- · Flurry of recession warnings fall amid snow at World Economic Forum in Davos (Thomson Financial News )
- · Ex US Treasury Sec Snow: Recession To Be Short, Shallow At Worst (Dow Jones)
- · DAVOS:Former US Treasury Secretary Calls For Bigger Fiscal Package (Dow Jones)
- · ECB's Trichet sees downside risk for EU economy, no plans to change outlook (Thomson Financial News )
- · Chancellor Merkel does not see danger of recession in Germany (Thomson Financial News)
- · Gold knocked by global equity plunge, rising dollar (Thomson Financial News)
- · Oil plunges amid global equity market turmoil, looming recession fears in US (Thomson Financial News)
- · EU finance chiefs say no risk of recession for Europe (Thomson Financial News)
- · ECOFIN EU's Almunia says threat is US recession not global downturn (Thomson Financial News)
- · Lehman Brothers says US one shock away from a recession (Thomson Financial News)
- · French Fin Min Plays Down Threat Of US Recession (Dow Jones)
- · Almunia says threat is US recession rather than global downturn (Thomson Financial News)
- · EU Almunia: Hopes US Econ Able To Avoid Recession (Dow Jones)
- · Japanese government bonds close higher amid global equity selloff (Thomson Financial News)
Analysts' Comments
- · Nouriel Roubini, chairman of Roubini Global Economics:
"My view is that the rest of the world can't decouple from recession in the United States." - Dow Jones - · Neil Mellor, analyst at the Bank of New York:
"People are coming to the view that it's not just the U.S. that's going to suffer. The dollar has been the default beneficiary as it's no longer a no-brainer to sell the dollar as markets fall." - Reuters - · Melinda Smith, currency analyst at ABN Amro:
"Despite the fact that markets remain unimpressed with the US economic stimulus package proposed on Friday, the dollar has held up well." - AFP - · Simon Derrick, head of currency research at Bank of New York:
"Financial markets returned to their familiar theme of risk aversion overnight as investors' fears over the spill-over of a slowing US economy into the global arena continued to fester. It now seems that the demise of the 2007 'no-brainer' trade of swapping the greenback for any number of higher-yielding alternates is gaining broad based acceptance." - Thomson Financial News
