Market Brief

The dollar lost ground against most of the G10, with the exception of the Cad, Gbp, and Yen. It was an active session on the news front with central bank meetings held by the ECB and BoE, as well as the stress test results of financials announced by the Federal Reserve. The ECB commentary held a more flexible tone following their decision to cut rates 25bps to 1.00%. While they did not decide to adopt a method of quantitative easing, ECB President Trichet stated the central bank will be active in purchasing pfandbrief (covered bonds)in an attempt to provide liquidity to financial institutions. The Euro reacted positively as both Traders and Investors have been critical of the ECB's lack of urgency in resolving the economic crisis. The BoE decided to keep rates on hold at 0.50%, which was in line with our projection. More importantly the MPC stated it would continue to its asset purchase program to a total of 125Bln sterling. The cable fell 133pips finding support near 1.50, a trend which may be likely to continue considering the lack of fundamental data to support a reversal in the near-term.

In the US, the Federal Reserve stated that 10 US banks will need to raise nearly $75Bln in capital to ensure stability if the recession deepens. Further risk stemming from mortgage related assets posed the largest threat at a potential $185Bln in losses. Firms like Bank of America and Citigroup were flagged as in need of more capital, even traditionally stable firms like Wells Fargo fell short of requirements. Some regional banks like Fifth Third Bancorp, PNC Financial Services, and KeyCorp also failed to satisfy the govt. evaluation, but overall early feedback from Investors sounds slightly relieved as if most of this data was expected.

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G10 Advancers and Decliners vs USD

Global Indexes Current Level % Change
DJIA Index8,409.85- 1.20
S& P 500 Index907.39- 1.32
NASDAQ 100 Index1,716.24- 2.44
FTSE futures4,362.00- 0.21
CAC 40 Index3,235.50- 0.86
DAX futures4,812.50- 1.59
SMI Futures5,329.00+ 0.17

World Markets Current Level % Change
Crude wti57.08+ 0.65
Gold913.38+ 0.29
Silver13.90+ 0.36
USD Index83.97+ 0.04
VIX33.44+ 3.05

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