Analysis of world markets

Key events for October, 29th, 2008

The world share markets show a second day positive dynamics of the auctions against expectation of the USA currency policy softening. Current moods promote decrease in the American dollar, however, if market expectations do not justify, current hints on a turn, both on share, and in the currency market will be broken through towards the global tendency. Considering worsening global prospects of economic growth current week again became week of decrease in rates. The USA, Norway New Ziland were already noted. To finish week of Japan rate falling. But a charm that it not the end yet. On turn, at least ECB and England Bank. ECB president Jean-Claude Trishe still has the day before yesterday declared that supposes possibility of decrease in ECB interest rates on November, 6th. In additives to it in the credit market depreciation of interbank loans that can speak about some positive influence of the measures accepted countries by the governments for stabilisation of the financial markets is observed. Three monthly dollar rate Libor has fallen to 0,05 % to level of 3,42 %. According to the data of the British bank association, rate Libor decreases the thirteenth day successively. Some time ago we already wrote, what exactly intensity in the credit market in aggregate with falling of the share push dollar upwards.

USD. FRS, as well as it was supposed, has lowered a discount rate on 50 basic points to level of 1,00 %. The further decrease in a discount rate probably only in case of strong pressure preservation in the financial markets. However in FRS report it is noticed that «the risk of economy delay remains. The committee will carefully supervise economic and financial events and to operate in a direction of healthy economic growth maintenance and price stability.» «Appreciable delay of economic activity» is marked. Inflation decrease «to levels compatible to price stability» is expected. Voices concerning the decision under the interest rate were distributed 10:0. Dollar index which traces the American currency against currencies of six basic trading USA partners, has decreased yesterday on 2,2 %, having shown, thus, the maximum decrease since 1998. Most likely, a wave of the dollar sales, begun long before FRS session profit fixing under the long dollar account has caused. The dollar sales volume specifies that the owner of the large account has decided to fix profit with the maximum execution as the probability is great that the part of these means was lending, and it is last week October. The market simply could not digest such sum and all trading systems have given failure.
Orders for the goods of long using in the USA have unexpectedly grown in September on 0,8 %, has informed on Wednesday the Ministry of the USA Trade. Analysts expected decrease in this indicator on 1,1 %. However it does not calm traders: the index of consumer trust and forecasts of gross domestic product growth show the extremely negative tendencies. FRS can pass to a policy of deduction base percentage more low 1 % and even to reduce it to zero against the general deterioration of an economic situation, the head of Scotland currency strategy department Royal Bank believes in Tokyo Masafumi Jamamoto. The Share markets on Wednesday basically showed growth, however analysts are not assured that this tendency will proceed. The aversion of risk can remain the defining factor in the short-term and intermediate term periods, analysts believe.

CAD. The Canadian dollar has become stronger against US dollar the maximum rates (+3,7 %) for last 37 years after gold, oil, gas and copper have grown in the price. It once again underlines an accurate binding of the Canadian commodities.

JPY. Cost of dollar credits in Asia has fallen on Thursday after the Federal Reserve of the USA has accepted agreements on currency swaps to facilitate dollar financing worldwide, and also declared decrease in interest rates. Intrabank dollar deposits overnight were quoted on 0.75-1.0 % in the Gong-konge, 1.0-1.5 % in Seoul and 0.75-1.25 in Singapore. It is a powerful signal to a turn as dollar, and yen. The Japanese state bonds have grown on Thursday on expectations that the Japan Bank can lower interest rates this week, having extinguished the previous losses which have occurred because of Tokyo actions growth. Index Nikkei has risen on 3,9 %, supported by decrease in interest rates in the USA and expectation that the Japan Bank will follow to this example during the next political meeting on Friday. The US dollar on Wednesday stably lost to the Japanese national currency after record growth since 1974 (more than 5 %) on Tuesday. Now not clear stay only scale of share market influence on currency as influence credit obviously weakens every day. One more uncertain factor is the scale governmentally programs of the help to Japan economy. It is expected that incomes of Japan taxes fiscal year prior to March, 31st can be on 5 billion yens below the planned 53,5 billion, but also this yet final number. The government can decide to cover the deficit by means of release additional goverment Bonds. Falling of fiscal incomes widely was expected, as global financial crisis slows down the Japanese export-focused economy. It is expected that prime minister Taro Aso will publish the plan of measures on economy stimulation later in Thursday which will include the general fiscal expenses in volume approximately 5 billion yens, including 2 billion yens tax compensation.

EUR. The participant of ECB Executive Committee Lorentso Bini Smagi has declared that ECB currency policy is limited by labour volume in the Eurozone and possibilities of the commodity market. Therefore even in the conditions of a worsening economic conjuncture it is necessary to adhere established before strategy, in which stability of the prices costs the main task. For this reason ECB it is compelled to brake easing of a monetary policy, despite signs of economic recession, considering pressure of the high prices. Yesterday ECB ascertained reduction in demand for US dollar this week as on the financial markets it has been thrown out an order of 106.6 billion dollars on the tender of 7-day loans, and for the interbank credit market. Last week ECB has satisfied demand for dollars at a rate of 125 billion dollars. In aggregate with low rate Libor (on 29.10.08 at level of 3,42 %) it gives hope of the credit markets stabilisation, and behind it and in general financial Europ market.  It rather well influences euro quotations. Euro support was rendered also by German chancellor Angela Merkel statement that the country government will take "courageous" measures for economy support. Besides, Merkel has told that will not support "the wide" program of stimulation which will be directed only on short-term effects.
It is necessary to notice however that the factor of the month end has not up to the end told yet the word both on share, and in the forex market. Fixing on steam of euro \dollar something is similar to a situation with actions of Foltsvagena. The last on the threshold of short positions closing have grown in the price in 5 TIMES!! And losses of hedges-funds speculating on them are estimated in 20 billion One it is possible to ascertain precisely - in the conditions of SUCH gamble neither fundamental, technical analysis do not operate. Though there is such sensation that long positions are not still fixed also euro strengthening more possibly, than the return.

GBP. The Great Britain Minister of Finance Alister Darling has declared that prepares the reference to the government with the request to change a tax policy for rescue of national banks and economic conditions improvement. It is necessary to generate new financial rules instead of former economic principles which worked last decades. Unprecedented financial crisis demands from the authorities of new management methods economy, the tax policy should support economic policy. Expenses of Great Britain on rescue of bank sector and the help to national economy can break its obligations on deduction of a  pure debt proportion to gross domastic product at a rate of 40 %. The Committee-man on the monetary policy of England Bank Blenchflauer has declared yesterday that for prevention of deep recession aggressive decrease in the interest rate is necessary. «If rates are not aggressively lowered, we will face prospect concerning deep and long recession», - he has told.