08 June 2012: Commodities crash, China cuts rates

Markets- Stocks down on inaction, Commodities under high pressure: Stock markets fell for the first time in 4 days after Fed chairman Bernanke promised no further easing in the USA, and also after China cut rates. Investors are looking mainly towards policy makers for any relief as their confidence remains jittery
•    Stocks: FTSE All World fell 0.7%, as FTSE Eurofirst lost 0.6%; In Asia mood is bearish as FTSE Asia Pacific lost 1.3% and higher-beta Tokyo’s Nikkei lost 2.1%; S&P 500 was flat in the last session but will open lower today; FTSE 100 has lost 0.7% to 5400
•    Currencies: Euro trades under $1.25 against Dollar again; Sterling against dollar is down 0.62% at $1.5432
•    Debt: The German Bunds dropped to 1.31% while US 10-years dropped to trade at 1.59%; Spain’s yields gained 13bp to 6.16%
•    Commodities: Brent Crude fell $2.12 to $97.95/barrel; Copper lost 2.02% today to sit at $3.30/pound; Gold fell 0.4% to $1580/ounce

Global Economy
•    China cuts main interest rate: China’s central bank has cut interest rates in China for the first time in 2008, in a view to boost the economy. The Chinese growth has been slowing down over the last two years, and is positioned for a slowdown this year too. A cut of 25bp to 6.31% has surprised the global markets, but is being looked at positively

•    Bernanke cautious about further stimulus: Bernanke dashed hopes that the Fed Reserve was to provide further monetary stimulus in the form of quantitative easing in the US. Bernanke also stated the US economy was fairly exposed to Europe, and the US is prepared to ‘take action’ to rectify the EU situation.

Companies
•    US banks face capital shortfall: 19 of the largest American banks face a capital shortfall of atleast $50 billion in order to meet the Basel 3 requirements. Fed officials however said that by retaining their earnings, the banks should be able to meet the requirements by the 2019 deadline. The Fed proposed that the banks’ common equity compared to their risk-weighted assets should be atleast 7%.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s