Current Futures: Dow -49.00, S&P -4.60, NASDAQ -5.75
European markets and U.S. Futures declined ahead of the Non-Farm Payroll release, which is expected to show the weakest read in the last 25 years. Asian markets closed the last day of the week higher, but the gains were limited.
The NFP report is expected to show that the unemployment rate jumped to 8.5% in March, from 8.1% seen in February, while the economy shed another 660K workers. If the forecast holds true, the U.S. economy has lost 5 million jobs since the current downturn started.
The financials were trading mixed during the European session, following strong gains seen in the last period, after the accounting rules were changed. The Financial Accounting Standards Board’s decision to change the accounting rules is one of the most important decisions taken in the recent past. The new set of rules would allow banks to use their own valuation models, rather than the current assets’ market price. This would help banks rebuild their balance sheets, since they will be able to overvalue the toxic assets that, until now, have dragged most banks to their knees.
This is another measure that heals the effects instead of the cause. Hypothetically, if a bank holds three assets worth $5 million and three liabilities, worth of $4 million, and two of the three assets proved to be toxic and loses a significant amount of their value (around $3 million) the bank’s liabilities would remain the same and the balance sheet value would be $-1 million, making the bank insolvent.
However, this is not the case here, because our imaginary bank does not use mark-to-market rules, but instead uses its own valuing tool, which first valued the assets at $5 million. This way, zombie banks are born, and we may see fabricated results in the coming quarters from the financial institutions.
Overnight, the Nikkei rose 30.06 points (0.34%) to 8,749.84. The Australian S&P/Asx gained 55.40 points (1.51%) to 3,735.60. The U.K. Ftse fell 10.04 points (0.24%) to 4,114.93, while the German Dax declined 19.27 points (0.44%) to 4,362.65
Crude oil retraced some of the gains made recently. Crude oil for May delivery fell $0.60 to $52.00
Gold appears to be heading towards the $900 level. Bullion for immediate delivery fell $2.20 to $906.40.