Finexo Market news and Recommendations

Wednesday, September 17, 2008

FX: CHF and JPY retreating after the rescue/bailout of AIG and the FOMC decision to keep rates at 2%. USD edging higher.

Fixed Income: 10-years trading in big ranges, directionless.

Stocks: US and APAC sessions +1% higher. Europe stock are down by 2-3%.

Commodities: Crude Oil finally seeing some buying interest. Precious metals are consolidating.

The markets are enjoying a broad based relief rally from the Fed assistance package that has been granted to AIG, the largest insurer by assets in the US. Considering the large potential implications of a the insurance company’s failure, Federal Reserve has decided to lend AIG $85B in return for a 80% share in the company stock, effectively nationalizing the firm.

While leaving the policy rates unchanged at 2%, the US central bank can now be observed to focus increasingly on targeted, emergency short-term loans instead. The bank has also changed its general collateral policy, as it now allows securities firms to use stock holdings as loan collateral.

The general rally in equities and carry trades also looks to extend to crude, with the oil prices rebounding from the steepest decline in 4-yr period. The oil prices have already seen a near 39% drop from the highs reached this year and have so far found support just above the $90 mark.


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