Current Futures: Dow -123.00, S&P -14.60, NASDAQ -19.50

U.S. Futures declined at a strong pace tonight, even though Asian markets are trading in the green. The main reason of concern seems to be the swine flu that recently hit the U.S. borders. 

“It seems that the swine flu is the latest problem to hit the U.S. and the global economy. For now, investors are afraid that the cost of combating the new disease will only add another strain on the government’s budget, already affected by the huge bailouts that the financial sector required. Additionally, in periods like this, consumers tend to spend less, which will also affect the business cycle increasing substantially the recovery period.” Trade Team said. 

However, Asian equity markets seem unaffected so far, reaching the highest valuation in the last three months of trading. The financial sector continued to advance tonight, helped by the unofficial, preliminary stress test results, which show that most banks have an adequate capital base. Jointly with the financial sector, pharmaceutical companies also posted some significant gains tonight, as drug sales are likely to pick up. Moreover, the Japanese government reduced yet again the GDP projections for 2009, down to 3.3%, tonight, something that should have dragged the Asian markets lower. 

Even though projections are the worst of any recent Japanese government, they are still better than the IMF’s projections, which forecast the economy contracting 6% in 2009. “The Japanese economy is expected to contract at a record pace this year, so the government is preparing to tackle the recession with the biggest budget on record,” Trade Team said. “This means that the government will have to borrow again, re-assuring Japan’s positions as the world’s most indebted country.”

Overnight, the Nikkei rose 68.64 points (0.79%) to 8,776.63. The Australian S&P/Asx gained 44.30 points (1.19%) to 3,756.60. 

Crude oil for May delivery was recently trading at $50.60 per barrel, down by $0.90.

Gold for May delivery was recently trading up by $2.20 to $916.30.