Mae & Mac: Too Big to Fail
Mon, Jul 14 2008, 13:55 GMT
by Andrei Pehar
Over the weekend, Henry Paulson pledged that the US Treasury will stand behind
Freddie Mac and Fannie Mae, citing that "these institutions are simply too big
to fail". I expect US markets to rally at open on this news - currently Dow
futures are at +117, +15.70 for the S&P, and +20.50 for NASDAQ.
Any
rallies are likely to be short-lived, however, as long as oil stays above $140
and continues to test $150. US bank IndyMac is the latest to crumble in the
spreading mortgage crisis, with other banks currently cited on a "danger list".
Market nervousness led to an extremely choppy European session, yielding few
trades (with close targets), and I would expect more of the same into the US
session as well. The GBP/USD is probably trending the best, as the FTSE - which
gained over 102 points so far today - leads the European
indexes.
This week will be all about
inflation figures. UK PPI, which measures producer costs, came in lower than
expected this morning for the month, however we are still on track for the
highest annual figure on record. And later in the week we will get CPI figures
measuring the cost increases to consumers in EU, UK and US. We also get retail
sales data for the US tomorrow.
So if the
consumer is the backbone expected hold up the world economy, we'll know much
better by the end of the week what state they currently find themselves in.
