By Krishna Guha in Washington
The dollar plummeted to a record low and the price of gold touched $1,000 on Thursday as retail sales figures confirmed that the US is in recession and concern intensified about spreading distress in the hedge fund sector.
The US currency tumbled against the Yen, breaking through Y100 to the dollar for the first time since 1995, to Y99.77 before recovering to Y100.79 in late New York trading. The euro moved to record highs above $1.56 before easing slightly.
As the euro rose in value, Goldman Sachs estimated that the eurozone overtook the US as the world’s biggest economy measured by market exchange rates.
Spot gold traded above $1,000 a troy ounce for the first time, while West Texas Intermediate crude oil hit $111 a barrel before dropping back. The trades above $1,000 an ounce in the spot bullion market in London were confirmed by several banks, although the level was contentious as it was not reflected on several trading systems.
Asian stock markets fell heavily, with the Nikkei down 3.3 per cent and the Hong Kong Hang Seng index down 4.8 per cent. In London, the FTSE100 fell 1.45 per cent to 5692.4.
However, there was some respite in New York after Standard & Poor’s predicted the majority of losses on US subprime asset-backed securities have already been disclosed. The credit rating agency said that it now expected writedowns related to subprime to reach $285bn (€182bn).
Investors initially fled back to the safety of government bonds, pushing down yields, though the flight eased in afternoon US trading as stocks clawed back initial losses, the S&P500 closing up 0.5 per cent.
Analysts said the market moves were being driven by intensifying dollar weakness and forced sales by hedge funds under pressure from their bank lenders to reduce their portfolios.
TJ Marta, strategist at RBC Capital Markets, said: “The feeling across fixed income trading floors is that the bottom is dropping out of markets. The Fed can cushion the blow but the market’s faith that they can provide a silver bullet is misplaced.”
Meanwhile, shares in Bear Stearns suffered again,dropping 7 per cent in New York over worries about the investment bank’s exposure to Carlyle Capital and other troubled funds.
The cost of protecting $10m of Bear Stearns debt against default over a five-year period soared to $720,000 annually on Thursday, compared with $580,000 on Wednesday. Even brokers offering $1.1m for a one-year contract said that there had been no takers.
Hank Paulson, US Treasury secretary, called on financial institutions on Thursday to raise new equity and cut dividends, and senior Democrats in Congress put forward a rescue plan to offer $300bn in loan guarantees for new mortgages.
Analysts said that the weakness of the dollar, expectations of further rate cuts by the Federal Reserve and additional injections of liquidity were fuelling commodity prices.
The markets are simultaneously grappling with mounting signs of forced sales by hedge funds driven to reduce their portfolios by lenders trying to reduce their own risk exposures.
David Rosenberg, chief US economist at Merrill Lynch, said: “The credit crunch has now reached the hedge fund industry.” Mohammed El Erian, co-chief executive of Pimco, said: “Today’s price action points to a growing number of hedge funds having to go into survival mode.”
Additional reporting by Chris Giles, Peter Garnham, Henny Sender and Michael Mackenzie
1 comment:
The article is very good with lot of information on finance and stock. But you will be intrested to know some more points related to it.
What is 'Recession Proof'?
You can almost hear the wallets snapping shut. Folks are cutting back on their spending every way they can. According to those who know, we are either in a recession, or are about to be. I would hate to be trying to sell real estate or new cars right now. Talk about hitting your head against the wall. Ouch!
That got me to thinking of what businesses make sense during a recession. Certainly health care does. Baby boomers are going to need every kind of health care imaginable. For all I know, economic bad times makes
people sick too.
Other types of businesses that should be recession proof include vital home repairs, like plumbing, electrical, and roofing. Folks can't put off fixing a clogged toilet or a leaking roof just because they're a little short on cash.
And you know what they say about death and taxes. A well-run funeral home or a tax consulting business shouldn't be hurt by an economic downturn.
But all these jobs require training, and even certification. And that takes time. By the time you've learned one of these trades, the recession may well be over. That got me to thinking about one business that's truly
recession-proof, and you can get started almost immediately: Day Trading.
Day Trading refers to the buying and selling of stocks within the same trading day. I know what you're thinking: how can a day trader be successful when the stock market is down, day after day? Well, day traders profit from
volatility - when there are big swings in stock prices, there is money to be made.
It used to be that Day Trading was only done by financial institutions with access to technology and information.
Now, almost anyone with Internet access can become a day trader, if they know what to do.
Manny Backus
P.S. Learn a 'sleazy' trading technique used by a select group of traders to bank lucrative, net stock returns of $223.00, $476.10, $790.25 or more -- not in days or weeks -- but in one easy hour or less! Click here:
http://www.firsthourtrading.com/
Post a Comment