Current Futures: Dow -34.00, S&P -4.10, NASDAQ -6.75
European Trade: European markets are trading higher, extending the global rally. Asian markets also closed in the green overnight, but U.S. futures lost some ground during the overnight session.
With today’s gains, the MSCI World Index reached the highest value over the last month. The world’s majors indexes have been pulled higher lately by financial companies and commodity stocks, both benefiting from the Treasury’s plan. In particular, Barclays and RBS rallied more than 6% on the U.K.’s Ftse, while the German insurer Hannover Rue rose 11% on very small volume on the German Dax. The company became part of the German index yesterday.
Commerzbank has forecast that the German economy will contract a whopping 6-7% this year. At the same time, both BNP and Deutsche Bank projected that the German economy will contract approximately 5% this year. Currently, Germany holds the bleakest outlook of all the European countries. The main concern related to the German economy is the huge drop in the export market, which accounts for about 40% of the German GDP.
Yesterday, Moody’s downgraded the debt issued by General Electric from triple-A to Aa2, two steps lower. The company had held the triple-A rating for 42 years, but tough conditions in the real estate and consumer loan markets might force GE to write-down some parts of its assets. Last month, GE reduced its dividend for the first time since 1938.
Additionally, a Bloomberg report, a few weeks back, showed that only 2% of GE’s assets are marked-to-market, while the rest of the assets, 98%, are priced at what value the company thinks they should be. The same report pointed out that the vast majority of GE’s assets are loans to consumers and businesses; so it is likely the company is currently overvaluing its balance sheets.
Bank of China, one of the top three banks in the world, announced that it received government approval to buy a €236 million stake in Rothschild bank. Bank of China waited a few months to receive the permission, after delaying the deadline twice. Among other things, this shows that China is curbing its foreign investments after its Sovereign wealth fund (which also operates within Bank of China) saw major losses stemming from the credit crisis.
Tonight, the Nikkei rose 272.77 points (3.32%) to 8,488.30. The Australian S&P/Asx added 29.70 points (0.84%) to 3,580.00. The U.K. Ftse gained 13.35 points (0.34%) to 3,966.16, while the German Dax rose 39.20 points (0.94%) to 4,215.57
Crude oil moved somewhat lower during the overnight session, after touching a new high earlier in the day. Crude oil for April delivery fell $0.50 to $53.55
Gold declined on positive equity markets. Bullion for immediate delivery fell $9.20 to $943.30.