Friday morning, the Spread between the Germany and Spain government bonds widened to an all new record-high of 546 basis points. The markets keep on punishing the already troubled Spain as the yield on the Spanish ten year bond has reached to 6.63%. Read the rest of this entry »
December comes to its end, volume could be significantly thin, but market moving data may be still ahead. U.S. and Japan both cut their target rates last week, leaving the benchmark interest rates close to zero. Economic data this week are also expected to raise concerns about weak demand in the two largest economies in the world.
Federal Open Market Committee is to set interest rate on Tuesday Dec. 16. Estimates show the possibility of a 50 basis points reduction when any reduction will bring the federal funds target rate below 1.00 percent. With interest rate close to zero, speculations rise about using unconventional measures for supporting the economy.
Retail sales in the U.S. probably fell sharply in November, a report from the Commerce Department may show on Dec. 12. Economists lower their forecasts for GDP numbers in response to more signs of a deep and prolonged recession. Recent estimates show that the U.S. economy may contract at an annualized rate of 5 percent in the forth quarter and it would be the second quarter in row that consumer spending negatively contribute to growth.
European Central Bank is to set interest rate this week along with other central banks in Britain, Australia, and New Zealand. While a rate cut is almost certain for all of them, the reaction from the euro may be different; probably much more dependent on the size of reduction.
Tired of bad news and boring calendars? You may find something different in the Britain. The Treasury will announce the U.K. pre-budget on Nov 24 when analysts expect to see tax cuts and spending plans. Interest rates are headed to zero around the world making the effectiveness of monetary policies more and more limited. It is when the prospect of economies, and certainly their currencies, has been increasingly related to stimulus packages and other forms of fiscal policies.
Reactions to the G-20 statement can shape the trend in financial markets on Monday but for the rest of the week there might be real facts than words which determine the sentiment. Politicians in the U.S. are under pressure to find a solution for the troubled auto industry which has the potential to cost millions of jobs. The Senate may review a rescue plan as soon as Monday and any progress could affect equity markets as well as oil, commodity and currency markets.
Reports on Thursday probably show that the Germany’s economy, the largest in Europe, contracted in the third quarter. However it is not only a euro’s problem when all major economies are facing the possibility of a recession together for the first time since WWII. The market is likely to be affected by speculations about the Washington Summit on Nov 15, where the world’s leaders are expected to pledge to coordinate their efforts and policies to stimulate economic growth and limit financial risks.
Tuesday’s election will determine the next president of the United States, the largest economy in the world; however it is probably its psychological impact that moves the market on a daily basis rather than any speculation about the possible outcome from an economic plan.
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Everything is ready to make the last week of October extremely volatile, not a good news for a long-term investor but may be the best time for a short-term trader. This week may show that the U.S. economy, the largest in the world, is shrinking and it may make sense to bet on fear and uncertainty when all economic data from consumer spending, manufacturing sector, and housing market are projected to be disappointing.