Confidence was pulling back through the open of the new trading week. A recent spat of positive forecasts and optimistic data over the past few weeks has given way to protectionistic rumblings and the sense that global leaders will be unable to produce any substantive policy that can turn the world-wide financial crisis and recession around. This is particularly dour news considering the single best chance for creating a real solution to the problem rests with the G20 summit in London this week.
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Market Wrap Up [/B]</p>
- Confidence was pulling back through the open of the new trading week. A recent spat of positive forecasts and optimistic data over the past few weeks has given way to protectionistic rumblings and the sense that global leaders will be unable to produce any substantive policy that can turn the world-wide financial crisis and recession around. This is particularly dour news considering the single best chance for creating a real solution to the problem rests with the G20 summit in London this week. US President Obama and UK Prime Minister Blair are adamant in their calls for the rest of the world to boost fiscal stimulus to prop up all corners of the world. European leaders (among others) however have not been receptive these demands. Sentiment will ultimately decide the market’s future.
- The sharp reversal in sentiment over the past few active sessions was most prominently seen through equities. The Dow has dropped 5% since Thursday while the DAX has plunged 6.4% and Nikkei 225 4.6%. Equity and debt investors have the greatest exposure to a failed G20 agreement. Growth, credit and solvency are all dependent on this meeting and will all impact traditional investment.
- Taking measure of risk, however, there have been a few very notable improvements in sentiment. Volatility indexes for equities, commodities and currencies have all improved to offer much needed stability. Also, credit default premiums have plunged as a clearinghouse is set up.
- Growth is an indelible factor to the G20 meeting as well. Without policy that could recharge activity, spending and production will plunge as will demand for commodities.
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Position Forecast (Market Highlights) [/B]</p> Bullish
- Money Market
- Long-Term Government Debt (Yields: US Treasury, UK Gilts, German Bunds, JGB)
Flat
- Emerging Markets (Banking Sector, Resource Producer Sector, Real Estate Sector)
- Commodities (Precious Metals, Energy, Agricultural)
- Short-Term Government Debt (Yields: US Treasury, UK Gilts, German Bund, JGB)
Bearish
- Global Equities (Banking Sector, Resource Producer Sector)
- US Equities (Banking Sector, Insurance Sector, Consumer Discretionary Sector)
- Long-Term Corporate Debt (Yields: Bank - Asset Management, Bank - Lenders, Insurers)
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Market Activity [/B]</p>
Written by: John Kicklighter, Strategist for CFDTrading.com
Questions? Comments? Send them to John at <[email protected]>.