Friday, March 14, 2008

Yesterday Dow Jones Staged A Rebound

Yesterday Dow Jones staged a rebound after UBS puts a more corrective figure of total cummulated subprime losses to around 270 Billion U.S.Dollars. This has soothed the nerves of stock market players to some extent and U.S. stocks recovered the over 275 points after opening lower sharply. Well can this be the turning point in current scenario for global financial markets, only time will tell as markets can't trust blindly any single institutions especailly when that particular corporation itself has written off huge losses in subprime mess. This piece of news, however, for the time being, has enabled investors to breathe after seeing huge selloffs continously for the past 3 months. On commodities front, crude oil retreated back after touching all time high of U.S.$111 per barrel mark. Gold too has hit an all time high of U.S.$1000 per ounce. Markets now are expecting a further 75 basis point rate cut this time around from U.S. Federal reserve and he will oblige to market forces. Markets seem to have discounted this rate cut event into current stock prices and any dissapointment on this front may send markets into more bad sentiment. U.S. dollar is currently trading below 100 mark against the japanese yen and inviting fresh unwinding of yen carry trade. At this moment Dow Jones is trading lower after Bear Stearns anounces emergency funding from JP Morgan and U.S. Fed. Asian equities too ended the day with lackluster trade followed by European indices. Markets on monday will take cue from closing of Dow Jones and that will deceide the action for rest of the week, markets will be learning to live each day as it comes due to huge uncertainity and nervousness hovering around.

Thursday, March 13, 2008

Panic Selling In Asian Equity Markets

Today's trading session saw huge selling pressure starting with japanese stocks, and that later on spilled over to other key stock indices of Indian, HongKong, Taiwan, Korea, Chinese, Brazil. Even European stocks are feeling the intense selling pressure and are trading lower. Dollar too has fallen below important level of 100 against the Yen for the first time since 1995 and is causing severe strain in yen carry trade functioning which is making leveraged players very nervous and worried. Crude oil too is showing strength and is making new heighs with each passing day. The way equity markets apart from Dow Jones are behaving extremely negatively to every bit of news, it's quite apparent that markets have fallen into the firm grip of bears. News flow too is very bad in terms of economic data from key industrial economies and rising inflation. Volatile currency movements and strong commodity prices coupled with extremely weak stock markets is making life very difficult for common investor and day trader as he/she is not expected to react to sudden sharp reversals and volatile and adverse news flows. Risk appetite among market players has evaporated and it will be test of nerves for them this whole year.

Tuesday, March 11, 2008

Asian Equities Show Strength Despite Weak U.S. Markets

Yesterday U.S. stocks close very weak due to poor performance of financial stocks after exposure to subprime related instruments and subsequent losses. Also aiding the slide was rising crude oil prices which are now trading at U.S.$108 per barrel. High inflation coupled with slower economic growth is making equity markets highly volatile. Also OPEC nations are not expected to raise crude oil output after tasting huge profits out of record high oil prices. However, today Asian equity markets today staged good performance in an otherwise weak sentiment due to extreme nervousness globally. European markets too are trading firm. It will be interesting to see whether this time Dow Jones take strong cues from Asian and European markets and trade higher or will it find it's own problems too heavy to digest these positive sentiments. Commodities are also showing mixed trend as regular profit booking is emerging as one doesn't want to repeat mistakes that have been made in profitable equity positions earlier in the month of jan 2008. Next few weeks will be very important in deciding future course of capital markets globally.

Monday, March 10, 2008

Mixed Sentiment Keeps Correction In Check

It's been quite weak close for global equity markets last week as they still are grappling with uncertainities related to extent to which large financial institutions will report undisclosed losses due to subprime mess, home foreclosures, rising credit card defaults, falling job market, falling home sales and home prices along with rising inflation and consumer confidance. Huge volatile moves are seen across the equity markets with weak sentiment taking the centre stage and no positive news coming equity way. U.S. fed will again cut rates aggressively is well taken by markets and no positive surprises from that end, markets know very well that cutting rates is not the solution to all the huge problems ailing the credit markets. It's the confidance and good faith that has taken severe beating this time around and will take a long time to come to normalcy. Commodities are looking strong due to certain possibility of rate cut by U.S. fed and weakning of U.S. Dollar. Profit booking can clearly emerge at this juncture as investors are deep in profits in key commodities like Gold, Silver, Copper, Nickel, Alumunium, Zinc, Crude Oil.

Friday, March 7, 2008

After A Brief Lull, Bull Run Continues In Commodities

Commodities are back in fierce action after staying soft for one trading day, crude is now trading close to 105 mark after touching 107 dollar per barrel mark. Gold and Silver too are finding many buyers at these heightened levels. Copper, alumunium, nickel, iron ore, coking coal all are trading at their life time highs and thus making inflation prime concern for all. Equities continue to sulk day after day with every bit of news that comes their way turns out to be really bad, especially from U.S. financial market space, leading the news space is Citi Bank who declared to close several bank branches in key U.S. states resulting in job losses. Swiss bank UBS also told about further losses emreging out of subprime carnage and thus making investors very nervous and uncertain about this whole mess. Adding to woes is a bomb explosion in New York Yimes Square yesterday that sent European and U.S. markets into tizzy. That huge negative cue took Asian markets along with it and key markets like India, Nikkie plunging between 3.5-5% in todays trading session. This whole thing is turning really bad and investor confidance has been broken so severly that any recovery would be very short lived.

Monday, March 3, 2008

Stocks Fell Like There Is No Tomorrow And Commodities Rose

Taking cues from weak closing by Dow Jones on friday's trading session, all Asian stock markets except chinese stocks fell very sharply and showed no signs of recovery throughout the day. Chinese stocks are bucking this weak trend for the past few days as chinese economy is still growing very strongly and taking the charge from U.S. in taking global economy forward. Commodities staged another strong trading day with major gains in copper, zinc, alumunium, nickel, gold, silver, crude oil. This alarming rise in commodities has taken most market players by surprise as they haven't expected this phenomenal rise in commodities after seeing severe crash in stock markets globally. The pace with which these commodities are rising is making life of central banks as they have very little room left in making loose monetary policy decisions with fear of sharp rise in commodity price led inflation coupled with slower economic growth. Stocks will continue to remain volatile with weakish bias unless market gets definite cues about sobering inflation, soft commodity prices, no more bad news from U.S. credit market and subprime sector, soft interest rates.

Saturday, March 1, 2008

Another Big Jolt To Dow Jones

Friday's trading session saw steep fall in U.S. stock markets, with Dow Jones falling by over 300 points and Naswaq by 2.58%. This fall is very bad news for Asian markets when they open on Monday. Euro is getting stronger against the U.S. dollar and has reached levels of 1.5. Yen too is trading very close to 103 mark against the dollar and continued weakness of dollar against major currencies is not ruled in immediate future. Commodity prices refuses to cool down despite fear of slow down in global economic growth. All this is forming an ugly picture where there is too much uncertainity,nervousness and clarity is bare minimum. U.S. banks are borrowing quitely from U.S. federal reserve for future lending purposes but this time they must lend with utmost caution and not throw cheap money to any borrower who in future will default at will. U.S. fed has admitted that smaller banks will fail after having exposed to subprime mortgage market. Financial market regulator must foresee and place stringent norms for introduction of riskier financial derivative products in credit markets which are introduced just for the sake of making a quick buck. If this trend is not stopped, then we are again headed for a disaster in credit markets. U.S. authorities must now stop giving lectures to other nations about how to regulate their financial market and instead look into their own backyard which is now full of skeletons which are also making life miserable for rest of the world. Financial institutions of other nations like Europe and U.K. must have now realised about the fallout of putting money blindly into something that they haven't thought about that it can take them on the path of bankruptcy. And the usual culprits again are people/investors who have lost tremendous amounts of money in recent stock market crash due to U.S. credit markets sins.

Friday, February 29, 2008

After Brief Strength Stocks Become Volatile

After remaining strong for some trading sessions, stocks again are showing weakness with large volatile moves. Hedge funds and other very high networth individuals are focussing on commodity trading, thus newer highs for major commodities. U.S. Dollar has again become weak against major basket of currencies, it's trading at 104 against the japanese Yen, and is very close to technical level of 100 mark. Crude oil continues to boil and is trading comfortably at U.S.$103 per barrel mark. This volatility in major currencies is leading to overall turbulance in global financial markets. However, some stock markets like Brazil, Pakistan are at their old heighs, and is amusing to many market players. This majot shift of tremendous money flow to commodity markets is making equities very volatile and causing inflation in slowing global growth. There is now a debate raging on in financial cirles about Stagflation where economic growth slows down but inflation continues to rise along with job losses. It's not difficult to guess as commodity prices refuse to come down and central banks refuse to stop printing money and hence demand for these commodities remains as usual. U.S. central bank must limit the amount of money it can print, otherwise value of that currency will continue to plunge and commodities which are dollar denominated will continue to remain firm. This uncertainity will not be going anytime soon and this will cause stocks and commodity prices to remain volatile.

Thursday, February 28, 2008

U.S.Federal Reserve Not So Concerned About Rising Inflation!

Yesterday a very peculiar stance is taken by U.S.Federal Reserve on concerns about rising inflation and its' possible impact in future. He is more concerned about slowing economy than controlling inflation. He said he is ready to cut rates even further in order to give boost to sagging consumer spending and falling home sales along with other weak economic cues. It's very contradictory that on one hand economy is slowing but inflation is rising! This is making life of central banker very much difficult and hence he is choosing one thing at a time and that is cutting rates to boost economy, later he will handle high inflation. Whether this approach is correct, only time will tell. For the time being, Euro is getting stronger against the U.S. Dollar on expectations that U.S. fed will continue it's rate cutting stance and hence interest rate differential in these two major industrial economies. Now United Kingdom will be asking for a rate cut from it's central bank and on the other hand, Germany will be concerned about high inflation in their region and hence will ask for rise in interest rates! Stocks can't for long ignore the looming threat of continued high prices in energy, food and commodities. Thus stocks will continue to remain volatile in an uncertain interest rate scenario.

Wednesday, February 27, 2008

Stocks Continue Their Journey Up The Hill

Taking strong closing cues from Dow Jones, which closed substantially higher after opening weak due to outcome of weak economic data, Asian stocks ended the day higher, leading the charge was Hong Kong stocks ending on a very strong note. European markets, however, are trading lower due to profit booking as they have been gaining for the past few days. Commodities continue their very strong bull run, Equity investors too have been participating strongly in commodity trading after burning their jands very badly in recent crash. The high commodity prices surely are making life difficult for central banks as inflation makes their policy making process very tight handed, on one hand they have deal with weakning economic growth and on the other hand they have to maintain low inflation, it can't go simultaneously as to simulate economy they have to cut interest rates and that pushes up inflation. It's like walking on a double edged sword. The smart money that got out early from stock markets in the month of December 2007, and gone into Bonds and a large part remained in cash, is indeed finding present stock valuations very attractive from long term perspective and hence utilising every fall as an buying oppurtunity. This is lending support to stocks and is very much desired.

Tuesday, February 26, 2008

Stocks Up Again

It's bcase of turmoil in U.S. markets that prompted Asian equities to undergo severe correction, and it's Dow Jones again who's strength is making Asian capital markets register positive gains for the past few days. A sharp rebound in late trading hours saw Down Jones ending with nice gains, this made Asian and European stocks to have positive gains. Stocks across the globe are now recovering from extremely tough period of steep and quick correction, but one area of major concern still remains is continued firmness in commodity prices. Almost all major usable commodity is seeing life time heighs with falling inventories at warehouses. Crude oil is consistently trading very close to U.S.$100 per barrel and gold, silver too are at their life time heighs. Copper, alumunium, coking coal, steel, iron ore, agri coomodities all are trading very firm. This is very serious from inflation point of view which is moving up sharply globally. Stocks will face resistance from this worry of rising inflation at higher levels, making stocks volatile and cautious.

Monday, February 25, 2008

Mild Profit Booking In Commodities, Smart Recovery In Stocks

Today's trading session in Asian equities saw smart pull back from day's low thus saving the day for die hard bulls who are desperately looking for some sort of relief after suffering tremendous pain for the past many weeks. Commodities after smart run-up are seeing mild profit booking with traders taking no chances this time around after burning their hands in equities. Copper, zinc, gold, silver, alumunium, nickel are seeing slightly lower levels and thus pose good for health of financial markets as there is very little left for any more shocks. Real estate markets in key Asian markets like India is seeing consolidation after giving super natural returns. Japanese stocks staged smart gains of around 3% in today's session. Only Asian equity markets that was down sharply is Chinese stocks which are still feeling threat of high valuations along with high inflation and possible slowdown in their GDP growth after completion of olympic games. Equities will continue to remain volatile for next few months as their are still concerns and nervousness among investors about economic growth, high inflation, high commodity prices, high interest rates, high real estate prices, huge losses from subprime mortgage exposure etc.

Saturday, February 23, 2008

Equities Out Of Woods? Not Yet!

Dow Jones stock exchange rebounded sharply from day's low in friday's trading session, thus saving the weekend blues for Asian and European stock markets that will take this cue when they open on Monday. Does that mean end of all woes for stocks, well i don't think so, but stocks do have discounted quite a lot of bad news coming out of credit markets in the U.S. and other news discussed earlier in the blog posts. Sentiment for stocks is still very bad and brittle, any rise in the markets see very sharp selling pressure as confidance has been battered so badly during january and fed month, it's very natural for market players to display this sort of nervous behaviour. However, there is too much of pessimism in global equity markets which is not amusing as equities typically behave very irrationally on both sides of ups and downs. For the past 4 years equities have given super returns to investors and rise was equally hyper optimistic, it had defied all gravitational rules and kept on going on despite various fears and concerns. This time when tide turned around, heightened pessimism has taken place for irrational optimism. That's how equities are!

Friday, February 22, 2008

Commodity Bull Run Continues

Commodity bull run continues despite weak economic indicators arising from U.S. markets. Stocks continue to bear brunt of hugely pessimistic view towards riskier assets and thus are bleeding relentlessly. Gold and silver are shining due to smart money preffering safe heaven over riskier stocks. Equities have undergone huge pricewise correction since January 2008 till date and this extreme pessimism is unwarranted as it defies logic of huge bull rally in commodities due to continued global economic growth of over 4% and on the other hand total pessimism on equities! This can't continue for long, equities are now offering value at present levels and thus can be bought at. How much more equity markets will suffer is that no body can be precisely sure about and it will be foolish to predict that, money will start flowing into these riskeir assets when it finds commodities too hot to handle. Till then, stocks will be hugely volatile.

Thursday, February 21, 2008

U.S. Fed Minutes

Yesterday Dow Jones opened weak on the back of very weak global equities, but after U.S. Fed Minutes which said that Fed is ready to cut more rates going forward in order to give boost sagging U.S. economy. But he also retariated that rate cutting spree will soon be reversed after economy finds it's feet on the firm ground. He is also concerned about rising inflation and losses write downs by big financial institutions. Commodities continued their upward march with Gold, Silver recording new heighs. Copper, Lead, Nickel, Iron Ore, Coking Coal, Steel also are trading very firm. Crude oil too has hit an all time high of U.S.$101 Per Barrel. All this doesn't pose well for the health of equity markets as they continously live in overall inflationary scenario. Today's trading session in Asian stock markets saw good gains in Japanese, Hong Kong stocks. Barring chinese stocks, all other Asian stock markets ended with positive gains. And as I speak, European stocks too are tradig in the green region. Markets will be keenly looking for any positive cues that they can latch on to as they desperately in need of some.

Wednesday, February 20, 2008

More Subprime Losses Reported By Barclay Bank & Credit Suisse

Today's trading session saw equity markets take a knock after Barclay's Bank and Credit Suisse reported losses running into billions of dollars due to exposure in U.S. subprime mortgage markets and credit instruments. Already weak equities were unable to absorb this one more piece of bad news from financial giants. Equities also have started factoring high food, energy, and commodity prices and thankfully they are doing it at this time. Currency markets too saw volatile movements with some Asian currencies weakning against the U.S. dollar, hence more pressure on those stock markets. U.S.Dow Jones too ended weak after opening strong in yesterday's trading session due to factors mentioned above. Commodities it seems are the only asset class that is seeing huge buying interest from various sections of innvestors and hence continued firm prices. Crude Oil is trading very close to 100 dollar mark and all will be watching this with great interest. However, central banks in Asian countries must be a worried lot as they have to counter balance effect of aggressive rate cuts by U.S.fed as well to control already rising inflation. China reported fastest rise in inflation after worst snowfall in that country and thus it's authorities will take some measures to cool down it's fast growing economy. Going forward equities will continue to test investors patience and will be very volatile.

Tuesday, February 19, 2008

Crude Oil Now Trading At U.S.$98 Per Barrel

So now what options does U.S. Fed have after seeing Crude oil trading at U.S.$98 per barrel, past history says he will ignore this cue as his fixation with subprime mess and subsequently on credit markets is still on. But for how long U.S. fed and other central banks can afford to show relax attitude towards this scarce commodity, well if one goes by conventional wisdom following past decisions by them, then only thing they will do is to print more and more money, thereby inflating all asset classes. They really don't want to address the core issues related to over supply of paper money. Instead only thing they encourage is excessive consumerism and continued supply of cheap credit to spur growth. Then who bear the brunt of sharp stock market falls, well that we all know. Oil Producing Nations Or OPEC too isn't coperating with tighter oil suppies and continued global GDP growth of over 4% isn't dampening demand for this energy commodity. It will be very interesting too see how smart players in stock markets respond to this very important development.

Monday, February 18, 2008

Stocks Cpmpletely Ignoring High Commodity Prices

For the past few days, commodities like copper, zinc, lead, alumunium, crude oil, gold, silver, steel, coking coke, iron ore have witnessed very strong prices. All this doesn't pose well for already inflationary scenario, especialy after capital markets have undergone severe correction. Stocks are recovering some of the lost ground but have not factoring the impact of very high food, energy and industrial commodity prices on overall economic growth and hence on corporate profatibility. These commodities will continue to remain firm as global growth is still strong at 4.1%, wiht china leading the charge at over 10% plus GDP growth and eating lions share of these commodities with demand from that country not slowing anytime soon. Expected cartilisation from steel companies has lead to firming up of steel prices glbally, iron ore producers to have increased price of this commodity by 65%. This price rise will be passed on to consumers and thus high inflation in the hands of end user! Goverments say prices are determined by market forces but we all know how cartelisation works and thrust inflation on us. As soon as stocks realise how high inflation has been affecting central banks monetary policy and companies performance, they will behave negatively, sooner they did so, better will be for the markets otherwise at irrationally high valuations what can happen we all have seen last month.

Crude Oil Very Close To U.S.$100 Per Barrel

Today oil prices rose above U.S.$96 per barrel mark and is very likely that it may retest it's recent intra-day high of U.S.$100 per barrel mark. This will be a pretty bad news for everybody as it has the potential to disrupt global economic growth, inflate already heated prices index, interest rates can rise sharply, demand can slowdown, and so on. Financial markets which have been thrashed in the month of January 2008 and in early part of Feb have slowly started recovering may not afford to ignore threat of rising crude oil prices. Central bankers too must be feeling nervous, after all this problem is created by them by infusing huge cash into the financial system during past decade. Equity markets will initially ignore this fact but smart investors will take this well into account of implications of very expensive crude oil prices on the overall health of equity markets and thus equities will be volatile during this period.

Friday, February 15, 2008

World Development Report 2008

World Development Report 2008 forecasts a gloomy picture about food grain availability in the world. It says grain production must increase by 50% in order to avert a food crisis. This clearly means that going forward, food price led inflation will only increase, thus making life very difficult for everyone from central banks to common man on the streets. This is bad news from monetary policy point of view as so far central banks especially U.S. Fed has so far only concentrated on supplying cheap money into the financial system thereby creating huge bubble in every asset namely Real Estate, Stocks, Commodities, they have so far ignored threat of rising inflation globally for the sake of protecting economic growth. All this will fall apart if inflation gets out of hand, worse affected will be people way down the wealth pyramid. Financial markets too will not take this situation kindly as threat to soft rest rates will increase and hence sharp corrections can be expected at those junctures. It will be very wise to get long on those agri commodities which are facing accute shortage and are expected to continue for long time to come.

Dow Jones Ended Weak, But Asian Stocks Bounce Back

Dow Jones ended weak after U.S. fed speech to congress ,depicting bleak picture of economic outlook and possibility of further losses coming out from various institutions and hence further weakning of labor and Housing markets. Asian stock markets took weak from weak U.S. markets, but managed to end trading session with flat gains. Volatility continues to be there in the stocks, however, at lower levels they are getting investors to lend support to already severely beaten down stocks. Crude oil too is trading very firm above 94 dollar mark, with Gold and silver extending their gains. Copper and lead too are trading with positive gains. Uncertainity over the extent to which U.S. will fall in recession is behind the nervousness and volatility in the stock markets. Today, Japanese central bank kept rates unchanged at 0.5%, making Yen more attractive for investors to borrow and deploy in high yield assets.
U.S. fed stated clearly that he is ready to cut rates further if economy doesn't show signs of recovery, this has lead to marekt players coming to conclusion that situation is still bad at the ground level. It will be not easy for equity markets globally to reach their old heighs this year as things are lot more comlex and difficult this time around leading the pack is tighter liquidity conditions in rich nations.

Thursday, February 14, 2008

U.S. Fed Speech Doesn't Inspire Much Confidance On Economic Outlook

Few minutes back, U.S. Fed said Inflation is serious concern for policy makers, Labor market and housing market conditions could deteriorate further. All this is not very comforting signs for already nervous financial markets. And as i speak, crude oil crossed U.S.$94 per barrel mark, thus making Fed very cautious on inflationary pressures. Central bank is in a very tight situation, on one hand he has to give boost to U.S. economy which is in pretty bad shape right now with rate cuts and fiscal stimulus, and on the other hand he has to contain inflation. Steel prices have been on the rise, and with expectations of further increase in the prices of iron ore, we expect price of steel to increase further in coming months, thus making many goods of daily use become expensive and hence infaltion in the hands of common man and high input cost for infrastructure space. All this doesn't mean good for inflation globally. Food prices too have hardened globally, making life tough for everyone. Equity markets have seen extreme volatility and bearishness unseen in many months, and this nervousness is not totally unwarrented. There are valid reasons for this bad sentiment and we have discussed all of them previously. Going forward, equity markets will remain volatile in wide range.

Stocks Rebound Sharply

Yesterday U.S. Dow Jones rose sharply after seeing better than retain sales figure, Asian markets took that cue and finished the day with smart gains. European stock markets too are trading firm at this moment. After weeks of carnage, this was expected and some relief for market players. However, markets have bounced bank almost 20% from their recent lows and some sort of consolidation is expected before any significant directional move. Gold, Silver lost some gains as traders flock to equity markets for some quick bargain. Crude oil however, is still trading well above U.S.$90 per barrel mark and is cause for concern for central banks and policy makers as well for equity markets. This time around U.S. Fed will not be under so much pressure to reduce interest rates as earlier due to no more bad news coming out of subprime hit institutions and he will be concerned about firmness in inflation. Volatility will continue to be the main theme for equity markets going forward as uncertainity still prevails in the investors mind.

Wednesday, February 13, 2008

European Central Bank Too Will Reduce Rates

After Bank Of England reduced interest rates, it's now the turn of European Central Bank to follow the suit. Developed nations are now under pressure from various economic factors to start reducing interest rates in order to contain their sagging financial system and credit markets and hence financial markets. Accute nervousness among investors continues and thus cause of high volatility. Today's trading session in Asia saw stock markets of HongKong, Japan, India ending with positive gains. Chinese stocks, however, ended the sessoin with losses. London and German stocks too have closed with some losses. Only exception was French stock who bucked the weak trend. Commodity markets too are seeing negative ticks in Gold, Silver, Zinc, Copper. It will be interesting to see how U.S. fed responds to U.S. economic data with rate cuts, if any.

Tuesday, February 12, 2008

Very Nervous & Cautious Trading In Equity Markets

Today's trading session in Asian stock markets saw very cautious investor and trading approach, after weeks of very steep falls, people have become extremely risk averse and are extremely reluctant towards equities in general, instead they preferring Commodity investment. They are right in their approach as equities are giving sleepless nights to each market player and situation is still very complex. Commodities on the other hand are lot more stable during the period in which equities were falling like anything, voaltility in commodities like copper, lead, zinc, gold, silver is minimal, thereby giving ample oppurtunity to earn profit or simply exit from position with minimal losses. On the other hand, equity markets haven't given enough time to very large section of market players to exit, even if they have exited, then that position was in deep losses, thus eroding confidance and patience. This carnage in equity markets will remain there in the people's mind for long time to come.