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The Financials Pit Review

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For the week of August 4th, 2008

Tue, Aug 5 2008, 06:40 GMT
by Kalvin O’Brian

Pit Guru

U.S. Economy

It is the first full week of trading for the month of August and it appears we will be starting it with the markets down. U.S. stock index futures fell, following declines in Europe and Asia even though this morning’s June report on personal income was up .1% and personal spending was up .6 %. In a consumer spending economy this is not a dire number. There was also a revision higher made for May. There seems to be continued concern and jitters fueled by the planned layoffs at U.S. companies jumping 26 percent in July from June. Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier. Construction and the auto industry continue to produce red numbers like clockwork. The Fed will be meeting this week and the consensus is that there will be more talk than action. Once the dust settles after the meeting it will probably be business as usual. There doesn’t appear to be too much good news out there so I am continuing to play this market to the downside. There are still some earnings due out this week, but any upside movements are subject to scrutiny. The volatility is there and I will continue to use moving averages for my entry and exits.

Currencies

The UK continues to face problems and that keeps bringing down the pound. An index of manufacturing in the UK dropped from 45.9 to 44.3 in July, lower than expected and the lowest in over nine years. In Australia, in index of manufacturing fell from 47.0 to 46.9 in July, an indicator of contraction for the second consecutive month. This doesn’t bode well for the resident currency since it will already be under pressure as commodity prices dip.

Even though Canada is rich in oil, copper and lumber, Canada’s economy is not far removed from the American economy. It’s amazing, last year Canadians celebrated dollar parity with its US counterpart for the first time since 1976, now it has been predicted that their currency could fall 17% through 2009. According to Statistics Canada, the northern nation’s economy contracted .1% in May, due to extraction of natural gas slowing and a drop in car production. The Bank of Canada also cut its 2008 growth forecast on July 15 to 1 percent from 1.4 percent. The downside is the path of least resistance for this market for now.

Published on  Tue, Aug 5 2008, 06:42 GMT