The slump in financial markets continued as more unwelcome news was received. Eurozone's PMI deteriorated sharply in September, raising worries over a double-dip recession in the region. In the US, 3 banks were downgraded by Moody's amid expectations on collapse of the country's banking system. FedEx trimmed its profit forecasts, intensifying fears of an economic downturn. The selloff in Wall Street accelerated with DJIA and S&P 500 losing -3.51% and -3.25% respectively. In the commodity sector, the front-month contract for WTI crude oil dived, breaking below 80 for the first time since mid-August, before ending the day at 80.51, down -6.30%. The equivalent Brent crude contract tumbled to as low as 104.84 before settling at 105.49, down -4.41%.
Eurozone's preliminary PMI data showed that both the manufacturing and services sectors in the region have fallen in the contractionary territory. Should this condition continue through 4Q11, the region will record GDP contraction for the quarter. This should inevitably increase the likelihood of a double-dip recession in the region. In order to stimulate the economy as well as to counter easing measures of counterparts, there are speculations that the ECB will cut its policy rate to 1% in as soon as October. A recession in the 17-nation region would not only affect the pace of fiscal consolidation in debt-ridden economies but also ruin global economic stability.
In China, manufacturing PMI, compiled by HSBC, stayed at 49.4 for a second month in September. Together with July's 49.3, China's manufacturing activities have contracted for 3 consecutive months, signaling tightening monetary policy and the rapid slowdown in both sides of the Atlantic have hurt the world's second largest economy. The situation is worrisome as global economic growth is basically dependent on China and other emerging markets when both the US and the Eurozone are at increasing risks of having recession.
Moody's downgraded 3 mega US banks amid concerns that they will not be rescued by the government in the current financial and economic situation. Short-term credit ratings for Citigroup, Bank of America Corporation, and Wells Fargo & Company while long-term ratings for the latter 2 were also trimmed. According to the rating agency, ‘the probability of government support for the banks is less now than during the financial crisis' and the current market condition could have ‘significant impact on capital position'.
On the dataflow, US initial jobless claims fell -9K to 423K in the week ended September 17, higher than market expectations of 428K. The 4-week moving average stayed unchanged at 421K during the week. Conference Board leading indicator climbed +0.3% m/m in July, above consensus. Yet, it appears that this index is overstating the growth outlook. The FHFA housing price index rose +0.8% m/m in July, compared with consensus of +0.1% and June's +0.9%.
By
M.Zohaib Gadit
Forex Trading Consultant
Eurozone's preliminary PMI data showed that both the manufacturing and services sectors in the region have fallen in the contractionary territory. Should this condition continue through 4Q11, the region will record GDP contraction for the quarter. This should inevitably increase the likelihood of a double-dip recession in the region. In order to stimulate the economy as well as to counter easing measures of counterparts, there are speculations that the ECB will cut its policy rate to 1% in as soon as October. A recession in the 17-nation region would not only affect the pace of fiscal consolidation in debt-ridden economies but also ruin global economic stability.
In China, manufacturing PMI, compiled by HSBC, stayed at 49.4 for a second month in September. Together with July's 49.3, China's manufacturing activities have contracted for 3 consecutive months, signaling tightening monetary policy and the rapid slowdown in both sides of the Atlantic have hurt the world's second largest economy. The situation is worrisome as global economic growth is basically dependent on China and other emerging markets when both the US and the Eurozone are at increasing risks of having recession.
Moody's downgraded 3 mega US banks amid concerns that they will not be rescued by the government in the current financial and economic situation. Short-term credit ratings for Citigroup, Bank of America Corporation, and Wells Fargo & Company while long-term ratings for the latter 2 were also trimmed. According to the rating agency, ‘the probability of government support for the banks is less now than during the financial crisis' and the current market condition could have ‘significant impact on capital position'.
On the dataflow, US initial jobless claims fell -9K to 423K in the week ended September 17, higher than market expectations of 428K. The 4-week moving average stayed unchanged at 421K during the week. Conference Board leading indicator climbed +0.3% m/m in July, above consensus. Yet, it appears that this index is overstating the growth outlook. The FHFA housing price index rose +0.8% m/m in July, compared with consensus of +0.1% and June's +0.9%.
By
M.Zohaib Gadit
Forex Trading Consultant
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