May 26, 2008
A TROUBLING
A TROUBLING, CRISPATION RENEWAL OF OIL AND UNDER PRESSURE OF INFLATION HANTISE ... MARKET UNDER INFLUENCE!
A TROUBLING ...
After having started the week with an increase of 16% compared to the low point of 17 March, the Bombay Stock Exchange then, like other places, returned ending a sequence of seven meetings beyond 5,000 points to complete a weekly decline of -2.8% to 4933.74 points CAC40 is a lowest since April 24 and an annual retreat back to -12.1% -18.4% year over year.
The SP500 has experienced its worst week since three months abandoning -3.5% or -6.3% over the year and -8.7% over the last twelve months.
... RENEWAL OF CRISPATION ...
The winds have certainly not lacking. There was first a series of indicators and statistics bleak in Europe, with the notable exception of Germany whose economy reaps the fruits of reforms carried out since 10 years as illustrated by the IFO index while in France the new stall consumption augurs badly performance of the second quarter.
Wednesday, the USA strong downward revision of growth forecasts by the Fed in a range of 0,3-1,2% versus 1,3-2% previously contained a scenario of near-recession in the great displeasure of Observers who have received this information as a cold shower as it was accompanied by an assessment of prospects for inflation. As if this were not enough, sales of old houses have continued to decline but more importantly prices also -8% over a year without it prevents stocks to grow by +10.5% and settling at the highest past 20 years, it has led to the idea that real estate crisis pace.
This combination of threats to economic activity caused a renewal of tension investors especially as fears about inflationary s'exacerbaient with oil prices.
... OIL UNDER PRESSURE ...
The surge in oil prices has accelerated with the reappearance of the theme of the shortage or at least the fragility of the current balance between supply and demand to thank you for any accident or incident seriously. The barrel was chained record after record (135 dollars a barrel Thursday) to finish the week at 131.7 dollars, up +30% over the year to a near doubling in a year, the average price reaching 2007 to 72 dollars.
This surge in prices is feared about its multiple consequences. Dores and already, for example, ocean freight rates are at the highest historical and sometimes exceed the value of the cargo as in the case of iron ore (X10 to 5 years). The outbreak of pressure gross household spending forced to arbitrate their spending while companies have to cope with their rising costs and sluggish demand often prevented from passing.
In this context, analysts face the warning signs of a chain they fear, namely: lower demand, higher costs, not price elasticity and ultimately lower margins ... and profits. Investors, for their part have conducted arbitrations sector, identifying the most vulnerable sectors such as aviation, automobiles, food, even distribution and enhancing their investment on raw materials (mines ...) oil sector and para-oil.
... THE HANTISE OF INFLATION ...
The high cost of energy and food prices affect the price indices and economists wonder about the risk of contagion on underlying inflation so far limited. Should it be otherwise, arbitrations consumer purchasing power packed afffecteraient many sectors and weigh on activity where renewed fears of stagflation, disaster scenario that appears unlikely but whose mere mention poisoning a climate already degraded.
As always in troubled times, markets LT rates have regained their role as a refuge. The 10-year rates have fallen to 3.83% in the USA and 4.26% in Europe while expectations of interest rate cuts by central banks refluaient for the Fed and were even up for the ECB to a probability increase towards the first quarter of 2009.
In this context, the rebound in the dollar was not sustained, the euro being determined +1.2% on the week (euro / dollar: 1576) is +8% over the year and +17.4% one year.
... MARKET UNDER INFLUENCE.
The rebound in risk aversion was brutal drop in equity markets, increased volatility, reflux dollar appreciation bond markets. The week ahead will be abbreviated to the USA because of Memerial Day and the United Kingdom but will be listened to the oil and its impact, particularly on prices.
The economic publications in Europe we learn about trust and economic sense but also on retail prices. In the USA will focus on indicators of consumer confidence (Conference Board and Michigan) while we take cognizance of the second estimate of GDP for the first quarter Friday and then spending and household income along with the index PCE price preferred by the Fed.
Markets should evolve under the influence of the evolution of crude and its effects especially since the few publications results of U.S. companies relate mainly distribution companies.
by erectusplus at 10:23 AM |
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