Global equity markets swallowed a dose of reality it seems on Tuesday in reaction to the raising of $5b in share certificate revenue by Goldman Sachs that will allow the Wall Street bell-weather to repay Treasury TARP funds received as part of the U.S. stimulus package. American retail sales were lower than expected, in a reflection of the lack of consumer confidence in the face of continuing employment losses, and no near-term relief in the availability of easy credit.
The rate of inflation at the factory gate fell in March, as seen in the Producer Price Index numbers that also came in lower than expected on Tuesday, and signaled a distinct lack of inflationary pressure, something that the Federal Reserve would dearly like to see at this time as a reflection of economic expansion.
An increase in the price of raw Goods and services usually gets passed on to the consumer; therefore this is the first stage on Retail Inflation. “The PPI report can go on to negatively affect CPI, Retail Sales and Consumer Confidence. This is an inflationary report and therefore is a pre-cursor to CPI data. In a a cycle of declining jobs and tightening credit, the lack of inflation and expansion will be difficult to break, TheLFB-Forex.com trade team members said. The fact that the dollar has held up as well as it has is testimony to the fact that the markets are still rushing to the Usd safety blanket when the short sellers step in. Once equities make the next leg higher the dollar index may come under pressure to break support.
At mid-day on Tuesday the Dow Jones and S&P were trading lower by an average of 1.8%, bucking the European markets that also closed in the green on their first trading session after a four day break. The damage on Wall Street has been caused by the financial sector dropping by over 2%, and the fear that over the next two weeks some major banking players may not hit their earnings mark.