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Monday, August 10, 2009

Morning Market Report

After another monster week, the major indices look to open just slightly. There is no news just yet and so thing could change quickly. There are no major economic statisitics that will come out today however the Fed's two day Federal Open Market Committee meeting begins tomorrow. According to Bloomberg, the FOMC will be focusing on the crisis in commercial mortgages.

The collapse in commercial real estate is preventing Federal Reserve Chairman Ben S. Bernanke from declaring the economy and financial markets are healed.

Property values have fallen 35 percent since October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year, pressuring companies such as Maguire Properties Inc., the largest office landlord in downtown Los Angeles, to put buildings up for sale.

The industry is likely to be high on the agenda when Bernanke and his colleagues sit down in Washington tomorrow for the Federal Open Market Committee meeting on monetary policy. Lawmakers including Barney Frank and Carolyn Maloney are pushing the central bank to extend an aid program designed to restore the flow of credit

While commercial real estate may be on their agenda, I've heard no one with a good solution to the impending crisis.

U.S. Treasury Bonds look to be opening just slightly better. The ten year is now trading at just above 3.83%. That's about two basis points lower. (two hundredth of a percent) Government bonds around the world, both from Britain and German, were all just slightly better today as well. Meanwhile, oil is also trading cheaper this morning. It's now just above $70 a barrel at $70.19.

Markets in the Far East were better though not across the board. The Hang Seng in China was up 2.72%, the NIKKEI in Japan was up 1.08%, and the Straits Time Index was even. Another Chinese index was down .34%. In Europe, indices were down nearly across the board. The FTSE in London was down .79%, the Dax in Germany was down 1.24%, and the Spanish index was down .47%. The Italian index was the only index to do better up .19%.

Finally, the U.S. Dollar is mixed against major currencies. It's down .06% against the Euro, up .5% against the British Pound, and down .41% against the Japanese Yen.

Meanwhile, the Bank of England is issuing a report that says that economic growth will be so weak that there is a risk of deflation. As such, the BofE (their central bank) is using this report to justify further quantitative easing. A former BofE minister says that he sees similarities between the current state of the British economy and the Japanese economy in the1990's. In other words, it's a gloomy Monday morning in England and it's a surprise their stocks did as "reasonably" well as they did today.

My analysis:

I'd be stunned if the FOMC changed their interest rate stances however everyone will hang on every word of Bernanke's statement following the meetings. So, stay tuned and expect significant volatility over the next few days following whatever announcement Bernanke makes.

Disclosure: Please note, I am NOT an investment professional. Everything here should be taken as informational only. All investment decisions should be made on a personal basis and nothing in this post should be taken as investment advice.

1 comment:

Anonymous said...

Looks like the good US economic news from last week coupled with the news that the UK and EU aren't as ready to raise interest rates as they previously let on has created a very strong possibility of a reversal in the dollar's decline.

I'm expecting to see the dollar appreciate by 5-10% in the next month.