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22/4/2008 − The Current Market Sentiment

Tue, Apr 22 2008, 06:50 GMT
by Walid Salah El Din

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The greenback buying wave faded after the weekend on the anticipation of further interest rate cuts to be done but the single currency is still finding difficulty in breaking 1.60 versus the greenback after a wave of cheeriness triggered a rally in the equity markets after the release of the loss of 5.11B$ of the Citigroup in the first quarter last Friday. The investors sell the Japanese yen buying the higher yielding currencies in a carry trade wave as there is an optimism in the market that there is no bigger loses of the housing and crediting problems than what's happened and the cutting jobs plan will take effect amid the current easing policy and fiscal stimulating plans. The news of planning of cutting 9000 jobs after the 4000 cuts planning of Merrill Lynch too helped these shares from another side calming the markets as there will be lower costs to be endured.

The gold is still under pressure as this sentiment has not ended yet and it is trading around 915 versus the greenback. The formed lower high at 955$ making a well confirmed resistance currently in the face of this pair.

The BOE plans of exchanging mortgages back securities for governmental bonds in an action to reduce the written down loans to bring back stability to the financial market providing liquidity and further ability to cover these loses. The talking is about 50 billion Stg of bonds initially. It seems the second governmental action after the northern rock governmental publication and it looks like that Gordon Brown's idea to solve the current financial problems in UK but there are still worries about its effect. The announcement has come amid the royal bank of Scotland news of shares issuance for 12 billion pound to underpin its capital too.

The looking for liquidity and further capitals by issuing shares and cutting jobs is the current market sentiment in the banking sector after the crediting problems which triggered by the US sub-prime mortgage problems which has come to the surface last August pushing the fed to cut interest rate from 5.25% to 2.25% currently and it is expected to continue this month meeting too as the consuming is still sluggish and there is no signs yet of recovery in the stock market. Last week, we have had a massive decline of US Mar building permits to 927k from 984k and lower than the market expectation of just 980k also Mar housing starts came lower than 1m to be just .947m and the market was just expected a decline to 1.02m from 1.065m in Feb. the data underpin the prospect that the bottom has not come yet keeping the  pressure on the greenback. We have today the data of the existing homes sales of Mar to attract the market eyes which are already on the housing market the figure is expected to decrease below 5 m to 4.92m from 5.3m in Feb and lower -1.6% from an increase in Feb By 2.9%.

Best wishes

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Walid Salah El Din

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Published on  Tue, Apr 22 2008, 06:51 GMT