Major Market Movers: Global Recession

Daily Forex Fundamentals | Written by Crown Forex | Nov 20 08 08:40 GMT |

Fear is back, the US indices lost ground yesterday after the minutes of the last FOMC meeting, where the feds decided to slash only 50 basis points letting down traders as they expected more fearless reductions. According to the minutes some fed members believe that deeper cuts will seize the United States from dipping in deflation. 'Economic conditions deteriorated in recent months' that what the statement added yesterday, the intensification of the prolonged Credit Crisis especially after Lehman Brothers collapsed managed to cripple the growth severely to the extent that the United States the largest economy in the world is now teetering on the brink of a deep recession. They also added that inflationary are likely to 'diminish materially', its true according the consumer prices reading which was released earlier yesterday, prices fell 1.0% on the month, taking the yearly prices down to 3.7%. The steep weakness the United States along with the falling commodity prices played a major role in taking consumer prices down near to the comfort levels. Revisions According to the current mess and the effect of the ongoing Credit Crisis the feds decided to revise their GDP expectations, output in the upcoming year got revised down to -0.2% to 1.1% from the previous estimate 2.0%-2.8%. No spending, after the second quarter of this year a steep downturn in the spending levels took place, the huge labor cuts that took place in the second half of the year had resulted in eating away the left over confidence between the US citizens as now they don't see any light at the end of the tunnel. This hesitation in spending took the GDP reading in the third quarter down to -0.3% where now we foresee a deeper contraction which would extend till mid of 2009. The falling earnings for companies' bedsides to the deteriorating demand had pushed those companies to terminate more jobs just to cut down their expenses, also the dark outlook for those companies had pushed the feds to revise jobless rates, the unemployment rate was revised higher to 7.1% to 7.6% from the previous estimate which stood at 6.5%-7.3%. Indices Tsunami After the minutes and the growth revisions along with the comments added, the US indices continued its free fall, the Dow Jones Industrial Average lost 5.07% or 427.47 points to close at 7997.28 levels, also the S&P 500 fell 6.12% or 52.54 points to close at 806.58 levels reaching to a total fall of 39.71% since the beginning of the year, the fall in the S&P is the worst since 1931; the NASDAQ vanished 6.53% or 96.85% closing at 1386.42 levels. Future indices continued yesterday's plunge, the Dow Jones Industrial Average fell 120 points since the early morning, in this journey the S&P lost 14.10 points to trade at 798.40 levels and the NASDAQ also declined 20.00 points to trade at 1072.50 levels. The fear hovering around all markets had pushed the Asian stocks to fall, as now participants' fears a deep global recession; the Japanese Nikkei Index fell 6.89 percent or 570.18 points reaching to 7703.04 levels affected by the exporting sector stocks which are now heading down south affected by the strength the Japanese Yen is gaining as investors tends to drop the high yielding assets. Also the Hong Kong's Hang Seng Index fell 5.98 percent reaching or 766.10 points reaching to 12052.88 levels. Waiting Fundamentals The retrieved fears in financial markets could create a muddle in today's trading, participants expect the worse, no brighter lights no more optimism… We started our fundamentals journey earlier today with the German Producer Prices Index reading, prices in German the leading European economy did not ease as what markets expected. The monthly prices eased only to a flat reading coming worse than expectations of a fall of 0.7%, also the yearly rose to 7.8% above markets projections in October. The second stop will be in the Royal lands, we are waiting to see the Retails Sales reading for the month of October, the down turn in the royal territory crippled the growth in sales, expectations stands at a fall of 0.9% on the month in October along with the yearly prices which might ease down to a rise of 1.4% from the previous 1.8%. According to estimates the public finances deficit might turn out to be a surplus today, yet those reading might be arguable because October was the month where the government approved on the bailout plan which means that they needed to issue guilt's just to gather up finances for this bailout plan. Governmental spending increased in the second half of the year especially after the downturn in the growth started to become obvious; along with this reading the Public Sector Net Borrowing deficit had narrowed to 0.4 billion according to the median estimate from the previous huge deficit standing at 8.1 billion. Moving to the US continent, we are waiting for the weekly jobless claims with expectations that claims narrowed slightly down to 505 thousand from last weeks reading 516 thousand, along with the continuing claims which will reach higher to 3900 thousand from the previous 3897 thousand. The deterioration in the employment sector and the continuous termination from various sectors in the economy will continue to weigh upon those reading as more citizens are filling for claims just to keep going with those misfortune times. In a different report the federal reserve bank of Philadelphia will release out their monthly report, to clarify how did the manufacturer resumed their work, according to estimates the reading will continue hovering in the negative levels a small improvement to -35 levels in November might be seen coming better than the previous fall 37.5, yet they might a possibility of more deteriorations dipping down south further more. Deep recession with some signals to deflation is hovering around the United States along various leading economies in the world, nothing will ease this tension; policy makers have to mitigate their infrastructure just to climb back on the ladder of achievements. 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