Market Review: Extraordinary Times with Extraordinary Moves
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March 28, 2008
US
Revised final 4th quarter GDP numbers came in at 0.6% as expected showing that the US economy had almost stalled in the 4th quarter of 2007.
Durable goods orders which measure the spending on US manufactured goods tumbled last month, down 1.7%, surprising the market and reinforcing the view that the US economy had stalled.
Technology shares were in focus with Oracle being sold down after revising forecasts downwards. Yahoo also came under pressure after February traffic numbers showed a 3% fall in the number of click throughs to ads by internet users.
Meanwhile, Ford which is undergoing restructure has agreed to sell its UK based brands, Jaguar and Land Rover to India’s Tata Motors. The sale is part of a restructure which hopes to see Ford return to profitability in 2009.
Asia Pacific
Small business confidence in Japan increased to a reading of 46.6 in March from 44.3 previously. Increased export growth helped the numbers.
In Japan, inflation rose on the back of higher oil prices. CPI up 1% in February which was higher than the 0.9% forecast. The Jobless rate in February rose 0.1% to 3.9% further supporting the case for a slowing economy.
Job Vacancies for February in Australia showed the first decline in 18 months as the Australian economy starts to cool.
The Reserve Bank Governor of Australia said in a speech this week that the Australian banks have little exposure to US subprime and should be able to weather the financial market storm.
New Zealand’s Finance Minister on the other hand warned that the New Zealand economy faces challenges and isn’t immune to a global slowdown.
UK
Bank of England said that it would be injecting more liquidity into the banking system with an extra 5 billion pounds expected to be added to help ease liquidity problems.
Now Deutsche Bank is saying that the effects of the banking crisis might now stop it from hitting its target. The bank said that it was due to the international financial turmoil that the bank has managed to scrape through reasonably well so far. The bank was aiming for a profit of 8.4B Euros which is still down from 8.7B last year.
The world’s largest listed hedge fund manager, Man Group said that it expects annual earnings to beat analysts’ forecasts.
End note
These are extraordinary times with extraordinary moves in markets across the globe. The markets have been up down and everywhere. At the moment, investors are fearful. For the emotional cycle to turn back to greed and optimism and for markets to rise, there needs to be signs that conditions are improving for companies to increase their profits. A key factor in this is their ability to get funding in order to grow their business and hopefully grow their share price. The good news is that central banks this week have concentrated on injecting liquidity into the banking sector. The bad news is that the market hasn’t responded well. There is still fear of more write-downs and still skeletons in the closet to be revealed.
Happy Investing!
Julia Lee
Head of Fundamental Analysis
HUBB Financial Group
Trading Tutors Team
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