After a disastrous 2011, linked to European and US Sovereign debt crisis, markets have struggled despite monetary & fiscal policy stimulus in both sides of the Atlantic.
Due to the Financial Crisis in 2007/2008, equity markets have become more volatile, less predictable, and without upward or downward tendencies – side way markets.
Even though world economies have succeeded in getting rid of a global deep recession, in the meantime, such economies could not escape the unemployment rate ghost.
Today, the mayor economies in the world are experiencing a deep recession, with the US, UK, EU, & Japan, taking their reference rates to a level closer to “0”.
Federal Reserve Chairman Ben S. Bernanke said the U.S. is facing ``grave threats'' to financial stability and warned that the credit crisis has started to damage household and business spending. ``Economic activity appears to have decelerated broadly,''
Former Federal Reserve Chairman Alan Greenspan said the worst of the credit crisis will pass once investors ``fully'' anticipate the likely losses on securities tied to subprime and other mortgages, where defaults have surged.
China's inflation accelerated to the quickest pace in more than 11 years after the worst snowstorms in half a century disrupted food supplies. Consumer prices rose 7.1 percent in January from a year earlier, the statistics bureau said today, after gaining 6.5 percent in December.
Some economists, survyed by a private company, believe that the dollar may extend a two-year decline against the euro on speculation a slowing economy will make U.S. assets less attractive to investors.
The U.S. economy unexpectedly lost jobs in August for the first time in four years, sending stocks lower from The Red Square and The Great Wall to Wall Street and increasing speculation that the Federal Reserve will be forced to reduce interest rates to counter an economic slowdown.
The yuan rose to the strongest since 2005 on speculation China will allow faster gains to help ease trade tensions with the U.S., after Treasury Secretary Henry Paulson urged increased currency flexibility. Some U.S. senators plan to introduce legislation in Congress today to push China to let the yuan rise quicker to reduce its record trade surplus.
China has curbed the amount that banks can borrow overseas. This measure will cut the Yuan’s pressure to appreciate. Chinese banks’ foreign reserves borrowing capacity will be reduced to 45% of 2006 level by mid year, and to 30% by March next year.
American consumers earned and spent more in November. Due to the Housing and Manufacturing slump in 2006, the FED Chairman, Mr. Bernanke, is counting on consumers to see the economy picking up in growth next year.
US unemployment fell the most in five years to 4.4%. This figure has reduced the FED’s probability to cut rates in 2007. Due to this report, the 10 Year US Treasury Yield has jumped to 4.71% - 11.6 basis points..
Crude oil fell below $60 a barrel, its lowest in six-months, after Iran's President said his country may consider discussions on its nuclear program, easing concerns that supply will be disrupted. Iran’s President said yesterday Iran is open to discuss ``everything'' if the U.S. stops ``threats'' against the holder of the world's second-largest oil reserves. The United Nations Security Council had given Iran until Aug. 31 to suspend uranium enrichment. Iranian officials have said they may cut oil supplies if punitive actions are taken against them.
U.S. stocks tumbled for a second day as oil climbed to a record due to the fighting between Israel and Lebanon escalated, and second-quarter earnings failed to meet estimates.
The dollar fell this week to a year low against the euro - 1.2740 - and tumbled versus the yen on speculation the Federal Reserve will soon stop hiking interest rates.
Brazil’s markets have overreacted to yesterday’s naming of new finance minister Guido Mantega. After having its biggest one-day drop in seven months, the Brazilian currency, Real, strengthened today.
The ECB raised its benchmark rate 0.25% today due to inflation concerns and economic growth. The ECB believes that the EU economy will expand 2.1% in 2006.
Mexico plans to buy back as much as 20% of the outstanding int’l debt. The US$ 5 Billion new bond issue will have a time horizon between 5 – 10 years; and it’ll become the benchmark bond.
Brazilian Bonds soared to a record high after the government announced a buy back program. As a consequence, the Brazilian currency advanced 1% as well as the Brazilian 2040 benchmark bond a 2%.
The ECB will probably keep interest rates unchanged at 2.25% in February as well as predict that inflation will stay above 2% in 2006. Higher oil prices and economic growth in the region will spur inflation due to a steady demand in the growth of salaries.-
On Jan’12, the ECB has voted to keep the overnight rate unchanged at 2.25%. The reason behind this monetary policy has been the pace of economic growth in the region; thus limiting future interest rate hikes. This monetary policy may impact the Euro's recovery.
The Euro has climbed 2.20% on average from 1.1850 to 1.2111 in the last four days. The expansion in European Services as well as the improvement in the Consumer Confidence Index in December have generated market expectations of possible future interest rate hikes by the European Central Bank. Due to these market expectations, the euro has been climbing steadily in the last four days.
The dollar has dropped versus the Euro to 1.1956 today, as a consequence of tomorrow's Federal Reserve expected comment that interest rates are no longer stimulating the US economy.
The productivity of U.S. workers rose at the fastest pace in two years and labor costs dropped for a second quarter, easing concern that rising wages will fuel inflation.
The European Central Bank raised interest rates for the first time since 2000 and reassured investors the increase isn\"t the start of a series. Stocks and bonds rose and the euro fell.
U.S. stocks climbed the most in a month, snapping a three-day slump as reports showed the economy is growing enough to lift earnings without generating inflation.
U.S. Treasuries fell after consumer confidence rose more than forecast and sales of new homes unexpectedly increased, dashing speculation the Federal Reserve is about finished raising interest rates.
