Current Futures: Dow -44.00, S&P -4.80, NASDAQ -3.00
European Trade: The global rally seems to have come to a halt in the last trading day of the week. Overnight equity markets declined, while U.S. futures also moved lower, extending the declines seen during the last trading session.
On the German Dax, the financial stocks were holding above the breakeven line during the early trading session, while on the U.K. Ftse the financials were trading mixed, some advanced while others declined. Commodity stocks continued to be among the top-gainers overnight.
The main topic of the European session was that the European Union refused to expand its fiscal stimulus. Additionally, the EU leaders rejected the plan to double the funds available for Eastern Europe, to 50 billion euros, since much of the current funds, 25 billion euros, had been used to bailout Latvia and Hungary.
One possible explanation why the European leaders rejected to increase the funds for Eastern Europe is that the European Union lacks the ability and technical skills to supervise the economy. For example, in order to get a loan from the European Union, Romania was conditioned and had to also request a loan from the IMF.
However, later this week, EU countries are expected to agree to add $75 billion to the IMF reserves. The International Fund is looking for ways to boost its reserves to $500 billion, as a growing number of countries are expected to request a bailout over the next few months.
In the mean time, the IMF published a report in which the current U.S. administration is criticized for the lack of “essential details” in its plan to save the financial system. The U.S. stability plan is criticized for the same recurring problem, a lack of clarity, something that will be critical to ensure the plan’s effectiveness. Additionally, the IMF assesses that the plan does not provide sufficient information on how the distressed assets will be valued (the same problem that reared its head in the Bush administration), or what exactly will happen with the insolvent banks.
In the last few days, the IMF said that the world economy might slip in 2009 to -1%, the first global contraction in the last 60 years. Furthermore, the Fund said that the global economy is not going to recover until governments achieve a “decisive breakthrough” in dealing with the credit crisis.
Tonight, the Nikkei was closed for business. The Australian S&P/Asx fell 14.40 points (0.41%) to 3,465.80. The U.K. Ftse fell 14.20 points (0.37%) to 3,802.73, while the German Dax slipped 19.67 points (0.49%) to 4,023.79
Crude oil traded above the $50 benchmark for the first time in a while. Crude oil for April delivery fell $0.10 to $51.40
Gold extended the gains seen in the last day of trading. Bullion for immediate delivery added $4.80 to $963.60.