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The Financials Pit Review

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For the week of April 14th, 2008

Tue, Apr 15 2008, 10:33 GMT
by Kalvin O’Brian

Pit Guru

U.S. Economy

The market still seems to have some room to the downside. Wachovia Corp helped the decline by reporting an unexpected loss - its first quarterly loss since 2001. This unexpected loss is also fueling concerns that the worst of the credit crisis has not come yet. General Electric also said that their earnings in the first quarter of 2008 were down 6% from a year ago and reduced their forecasts for the rest of the year. Retail sales in the U.S. were up .2% in March although this number is excluding autos. The University of Michigan’s index of consumer sentiment dropped from 69.5 to 63.2 in April. This is a number which was weaker than expected and it is also the lowest in over 25 years. There will be some discount buying but overall this market has a bearish tone.

Currencies

The June yen had its highest close in a week. Will this cause Japan to raise its interest rate? Producer prices were up 3.9% in March from a year ago, the largest increase in 27 years reported this by the Bank of Japan. Deflation has been the recent struggle for Japan. There could still be some room to the upside. After the weekend meeting the G-7 voiced concerns that ``sharp fluctuations'' in currency markets may hurt the global economy, which ``continues to face a difficult period.'' The yen advanced as a drop in stock markets caused investors to cut holdings of higher-yielding assets funded by loans in Japan. This statement also came out of the meeting - ``Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,'' the G-7 statement said. ``We continue to monitor exchange markets closely, and cooperate as appropriate.'' I believe that a stronger greenback is what is wanted by almost all; however we will need some help to make it happen.

Published on  Tue, Apr 15 2008, 10:35 GMT