Major Market Movers: Citigroup Bailout

Daily Forex Fundamentals | Written by Crown Forex | Nov 24 08 08:49 GMT |

A start of a new week, markets are getting started to prepare themselves for more disasters in the financial markets along with more fundamentals darkening the outlook till the end of the year. The holiday season is getting closer; the spending extravaganza which used to take place in the last month of the year might turn out to be the saddest month on the US citizens along with others across the world. No money to spend as more job terminations are taking place across the globe due the consecutive failure in the financial sector diffusing to weaken economies. Citigroup Bailout Citigroup the largest financial network soured to the extent the Feds had to run to bail them out, their stocks tumbled in the past week falling a total of 60%, investors thought about taking all their money out as they saw the bank teetering on the edge of a potential failure. Based on all that the feds came to help, providing a total of 306 billion dollars to support the troubled assets, the plan is divided in to 20 billion dollars in cash planting, along with the previous sum of money that was given under the Troubled Asset Relief Program, but to secure their position the feds will be getting a total of 27 billion dollars in preferred stocks just to compensate any chances of losses, where the bank will be obliged to pay 8% dividends. A huge financial network such Citigroup needed this bailout, the fall down for this company would result in an endless turbulence in financial markets larger than Lehman Brothers effect. Yet the feds continue to bolster the financial sector leaving other major contributors to the economy such as the General Motors and two other major car manufacturers to find solutions to save themselves from sink a victim to the prolonged Credit Crisis Surging Indices Optimism was seen in the Friday closing session which was ensured earlier today with the Citigroup bailout… After Obama's Office nominated Timothy Jintr for the minister of Treasury the US indices surged; the Dow Jones Industrial Average inclined 6.54% reaching to 8046.42 levels and the S&P 500 also managed to climb higher to 6.32% or 47.59 levels, along with the NASDAQ index which managed to 5.18% reaching to 1384.35 levels. But the optimism continued to be seen in the US futures earlier today especially after the Citigroup bailout, the Dow Jones inclined 66 points reaching to 8102 levels, S&P 500 managed to gain 13.20 points and NASDAQ inclined 13 points. This movement was not really traced in the Asian session, indices fell on the fears that failures in the financial sector is not yet over and more destructions will take place. Hong Kong's Hang Seng index fell in the Asian session 0.50% or 63.02 points reaching to 12587.66 levels, also china's CSI 300 index lost 4.37% or 83.96 points reaching to 1836.70 levels; even when the Japanese are taking the day of in observance of the Labor Thanksgiving Day their December 08 future Nikkei Index lost 60 points reaching to 7890 levels which is still below the 8000 thousand the Bank of Japan favors. Fundamentals Continue to Tumble As we moved in toward the end of the year the outlook gets darker; December the month all retailers used to wait for because their sales surge higher giving them higher incomes would not be seen this year. Spending continue to slid down south recording new lows. Due to this down turn in spending expectations clears out that a contraction will take place in the fourth quarter of this which will come for the second consecutive quarter especially after we saw the third quarter shrinking. According to available data on our calendar, this week we will see a deeper contraction in the third quarter growth, revision might take place according to estimates the GDP reading will be revised down to 0.5% from the previous -0.3% which was released earlier. The deepening weakness in the spending and demand had weigh upon the Durable Goods orders, orders in October fell 3.00% from the previous rise 0.9% along with the durables ex transportations losing 1.5% from the previous -1.0%. Also we are waiting for some housing data, we will start today with the Existing Home Sales, sales might eased down to 5 million unit sold in October from the previous 5.18 million, and the monthly sales fell 3.5% from the previous rise of 5.5%. the continues to distresses seen in October the second month after the Credit Crisis had managed to cripple demand, banks are not even considering giving out loans to investors especially when have any connection to the housing sector. Moving to the European Continent The calendar is full of fundamentals, more contractions and weaknesses is what we expect this week along with the inflationary pressures dragged down south due to the slowing domestic demand. We will start our day with the EU current account and the industrial productions; the slowing global demand which curbed the levels of exports from the fifteen economies will be the main reason behind another deficit in the current account reading especially today's reading is for September the month the Credit Crisis intensified. Also the month industrial order fell in the September reaching to -2.8% from the previous fall of 1.2%, along the yearly orders which might improve slightly from the previous -6.6% to -1.5% in this turbulent month. From Germany we are waiting for some confidence data; according to estimates the IFO business climate will dip down to 88.7 levels from the previous 90.2 in November along with the Current Assessment which might continues to weak more than what markets expected reaching to 96.8 levels especially after more destructions will be seen and finally the IFO expectations might retreat slightly to 81.0 levels from 81.4 levels. There are expectations that the data will come in better than expectations because the bailout plan which was approved in October bolster the confidence preventing it from dipping down south. A gloomy holiday season is awaiting us, spending levels, demand, production and confidence will continues heading down south and the world's citizens will record the worst holiday in 2008. Crown Forex