Forex Blackberry
Wall Street Rally credit … More of crisis?
Last week the ECB (European Central Bank) and MPC (UK central bank) opted to take a "Wait and see 'with interest rates. They announced that they would suspend interest rates, preferring to see how their respective economies store until after the turmoil of the summer. Many economists expect both to move to a bias of relaxation in the future, with the UK expected to cut rates before end of the year.
Early U.S. markets last week higher power on the release of economic data that the increased likelihood a cut of 25 basis points in interest rates. The Dow Jones broke through its previous record high of 14,000, while the broader S & P 500 did the same on Friday. Leading the charge has been the high-tech Nasdaq 100, with companies like Google, Apple and RIM (Blackberry) feeding to unprecedented levels. Many questioned the Google IPO price of $ 100 per share, but with a share price of about $ 600, Google continues to grow
leaps and bounds.
Next week begins with some heavy advertising for the United Kingdom, with PPI and industrial production figures has a potential impact on any interest rate
decisions. FOMC meeting minutes are usually analyzed word by word by Fed watchers, and Tuesday release of this information is no different. Each line will be examined and opaque sentences will be interpreted, all hoping to gain clues as to the likelihood of a further rate cut. Wall Street is another barking court, and any suggestion in any case, could see significant market movement. Friday sees the release of vital retail spending and sentiment data consumers in the U.S., both of which show to what extent the recent credit crisis has affected the economy in general. Some economists have put the odds of a U.S. recession up to 50%, but this view was questioned with stronger than expected payroll numbers last Friday.
In elsewhere in the currency markets the euro has come off its highs against the dollar and pound, but remains well above pre summer / pre-peak levels. Part the reason for this strength has been the fall in interest rates in the U.S. compared with the tightening bias of the EBC. Both the EBC and the MPC may follow their American cousins in reducing rates, but if they do, it is likely that perhaps there could be a time gap between potential and a potential cut MPC cut EBC.
On this basis, the euro would remain strong against the pound until 2008. Also in December could bring a surprise to government finances in the UK. A report recently revealed that in December the government will have to include its PFI liabilities on its balance sheet. If this were to happen which could potentially put more pressure on Sterling to with increasing debt. With this in mind, one does not touch the trade could be an option in the EUR / GBP exchange rate. A touch not with a trigger in 0.6700 more than 90 days becomes 12%. This allows time for any potential PFI difficulties to come into play.
Matt Shaw personal comment
The Dow continues to play label with the level of 14000. I do however think that anything beyond 14 200 in the Dow will not be for several weeks, possibly months.
For the S & P, if we break below the 1445 level over the next 2-3 sessions, then the sell-off could begin. I estimate that we will begin the breakdown (if not already begun), by means of a gradual process after next Tuesday and Wednesday – 9th/10th October '
There are a lot of cash out there now, ready to be put to work. Before now, has been split evenly between stock funds and credit funds. With the Credit Crunch saga giving off (funny choice of words) in recent times, this has led many people in recovering their investment credit funds, bond funds and fixed income then put them to work in stocks.
The market seemed like a kind of safe haven and the losses are apparently controlled. The combination of these factors with low interest rates, and the backdrop of inflation, and it seems that the actions were a 'buy easy ", so no great sell-off towards the end of September
Now I sit down in the range trade in the coming weeks and I say with a gentle touch of doubt – which can then sell the debris from a (more than mild) end middle / end of October with the FTSE – Resistance to the support 6 610 6 325.
This week could be the beginning of a strong reduction, or a new record, through a further increase of 1.2%!
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