as suddenly markets regain their faith in the outlook and all the measures taken to stem the crisis and then out of nowhere the confidence is scattered once more as the agony proves to be alive and ticking overshadowing the light at the end of the tunnel...
We are starting a heavy week of important fundamentals with a quiet entry as we lack any major fundamentals today, which in role has opened the door for investors to yet focus further on fragile conditions in financial markets and especially those revolving around the financial sector and the troubles banks continue to face on the back of the worst financial crisis since the Great Depression!
The United States by its administration, Treasury and the Federal Reserve has been working around the clock to recreate stability in its financial sector after the crisis has redesigned the geographies of the American banking industry!
Starting the major bailout schema in the United States with the TARP that was merely one of the numerous packages delivered and now for the Treasury they reached to the conception that in order to break the deadlock over lending and resume order in financial markets there is no other way but to acquire those toxic assets ailing balance sheets, by creating what is known as bad bank! Yet still as Geithner failed to convince markets of the worthiness of this plan they continue to stumble upon the ruins of the days of glory while clues only added to fears that the recession is deepening and the credit crisis continues to count its victims!
Nonetheless, the start of this week was with an optimistic glow, where news that the government is to increase its stake in Citigroup as the giant continues to carry the burdens of the recession and the credit crisis ate through their status, yet as their shares are rattled investors are more keen to see that the US government is abandoning the idea of shunning what is close to temporary nationalization and take control of banks preventing their failure which might have very high systemic risk and might shock markets into a new huge sell-off wave just, as that seen after the failure of Lehman Brothers.
As governments step forward with measures and efforts and take accountability financial markets are exhaling some of the pain they feel. US futures started the week trading higher in the Asian session on the Citi news proving that none are allowed to fail anymore. While as most key Pacific markets rose and the MSCI Pacific index gained nearly 1.2% today Japanese and Australian stocks fell today, where the former dropped 0.5% to close at 7376.16 ironically on fears of more companies facing the threat of bankruptcy after the failure of lender SFCG Corp and the latter fell 1.5% to close at 3351.20, while Hang Seng was 3.73% higher near the end of trading at 13177.70.
This week is quite busy as looking at the US economy we are awaiting on more housing data which is to be of major focus now, especially that the Obama plan has reignited the focus on the sector that was taken for granted to continue tumbling yet now the disappointments if the downside slide continues will be even greater though it was a given. We have the weekly labor figures and durable goods orders which surely remain weak as spending is still subdued in the US.
While most importantly this week is the preliminary GDP estimate for the last quarter, where median estimates expect a deep revision to a contraction of 5.4% from 3.8% contraction according to the advanced estimate.
According to a poll taken by the National Association for Business Economics the US economy's recession is to be the worst in nearly three decades since 1973-75 contracting by 1.9 percent!
A new rough ride in markets this week for sure and the start was with optimism over the government efforts to prevent a new round of credit seizure, while the dollar started weak today and the focus is again on Gold to see if the $1000 areas are to be seen this week again though so far signs are saying otherwise...