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Friday, February 13, 2009

GLOBAL MARKETS: US Stocks Seen Up On Mortgage Plan Hopes

LONDON (Dow Jones)--U.S. stock prices were tipped to open higher Friday, as the momentum from Thursday's last-hour rally on Wall Street continued to provide investors with some hope.

A wire report Thursday said the Obama administration was hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a repayment means test, citing sources familiar with the plan.

"The market is hopeful that the reported mortgage rescue plan could genuinely help kick-start the woeful U.S. housing market," said Martin Slaney, head of derivatives at GFT Global Markets.

He called the Dow Jones Industrial Average 48 points higher, or 0.6%, at 7980.76 and the broader Standard & Poor's 500 index up 5.4 points, or 0.6%, to 840.59.

Leaders from the Group of Seven industrialized nations will meet in Rome this weekend, to discuss coordinated measures to tackle the financial crisis.

"The rescue of the financial system is likely to be at the heart of discussions and may well result in a verbal commitment by the members to cooperate closely to try and stabilize confidence," said Kenneth Broux, an economist at Lloyds Banking Group. At 1049 GMT in Europe, the pan-European DJ Stoxx 600 index was up 1.7% at 194.07. London's FTSE 100 was up 1.4% at 4263.16. Frankfurt's DAX was up 1.6% at 4479.04 and Paris's CAC-40 was 2.1% higher at 3028.50.

Thursday, February 12, 2009

EUR Falls Broadly on Russian Downgrade

The EUR is trading near a two-month low against the Dollar on speculation the economic slump in Eastern Europe will cause the Euro-Zone’s recession to deepen, and markets are worried that Eastern Europe’s situation will get worse before it gets better. The EUR was traded at 1.2852, up from 1.2849 late yesterday. It reached 1.2706 on February 2, the lowest level since December 5. The EUR also tumbled against the Dollar and the Yen after Fitch downgraded Russia’s long-term foreign and local currency ratings, sparking fears of a steep downturn in Eastern Europe. Against the JPY the European currency may decline further as traders increase bets that the European Central Bank (ECB) will cut Interest Rates further today.

The EUR also weakened yesterday as the European Union’s (EU) statistics office in Luxembourg said retail sales fell 1.6% in December from a year earlier. Analysts say that in the Euro-Zone there is still a drip-feed of bad economic news, which is weighing on the EUR and keeping risk sentiment on the back burner. Data released earlier showed deterioration in Europe’s dominant services sector, and separate numbers showed Euro-Zone retail sales falling more than expected year-on-year in December. The EUR has also declined 1.6% to 88.76 against the British Pound after a report showed the U.K. services industry contracted less than forecast in January, and U.S. companies cut fewer jobs than previously expected.

Pound Tumbles Due to Aftershock of U.S. Treasury Speech

The Pound slid against it major currency pairs as it felt the shockwaves of the Pessimism in the U.S. following the disappointing speech about a banking bailout by U.S. Treasury Secretary Timothy Geithner. The British economy and British currency are extremely volatile due to negative news from the U.S. and Europe, as their economy has been hit worse than many other countries in the developed world since the start of this recent recession. For example, Britain’s GDP is expected to decline the most out of the G7 nations, by over 2.8%, according to the International Monetary Fund (IMF).

The GBP slid by a staggering 350 pips to 1.4481 vs. the USD. It slid by 220 pips vs. the EUR, against the JPY it slid by an enormous 430 pips to 131.19. These large losses show that investors returned to safe-haven currencies in yesterday’s trading sessions. The thing that this shows forex traders is that the Pound acts very negatively to uncertainty in the financial world. Therefore, a lesson for the future may be for investors to follow U.S. news events more closely, and use the GBP as bait. This is useful because the Pound is very volatile to both positive and negative economic news coming from the U.S.
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