Global Cooling

Published by Filipe R. Costa on Wed, 10/10/2012 - 11:51
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Daily Market Commentary for October 10: Things got really ugly after the IMF downgraded global growth. The Dow showed a loss of 0.8% not seen since August 30. While global warming continues to increase the average temperature, global cooling dims the average growth.

It is interesting to look at IMF actions. They first impose tough austerity measures in peripheral Europe, just to downgrade global growth the second later. Unfortunately, with so much austerity being imposed globally, after a financial crisis devastated public finances, the final result couldn’t be other than global recession. Even the likes of China and Brazil are now facing tougher times, with growth prospects being downgraded every month.

Investors have been lifting equities on monetary easing prospects but fear continues to put a cap in prices. QE3 helped but there is so much happening at the same time, that it is difficult to guess the final effects of this. For now it seems that some roller coaster movements are on the cards as conditionality does not allow for equities to go much higher whilst monetary easing secure them from any prolonged downtrend. We will have to wait for the earnings season and see how companies are doing. At first sight, prospects are not good and expectations are for a really bad quarter but looking at Alcoa we have reasons for some confidence. The Dow component presented earnings topping estimates and good revenue growth. That’s always a good presage.

Name Last price Close Price % 5-Day % YTD %
DAX (Xetra) 08/10/2012 7291.21 -1.44 -0.48 23.61
Nasdaq 100 Index 08/10/2012 2786.92 -0.89 -0.26 22.35
S&P 500 08/10/2012 1455.88 -0.35 0.79 15.77
Gold (LBM) $ 08/10/2012 177510 -0.29 -0.25 13.29
Dow Jones Industrial Average 08/10/2012 13583.7 -0.19 0.51 11.18
CAC 40 08/10/2012 3406.53 -1.46 -0.83 7.81
FTSE 100 08/10/2012 5841.74 -0.5 0.37 4.84
Nikkei 225 08/10/2012 8863.25   0.76 4.83
GBP/USD - US $ per £ 08/10/2012 1.6032 -0.64 -0.63 3.23
Crude oil (Brent) Composite 08/10/2012 11079 -0.01 -0.34 3.15
FTSE MIB 08/10/2012 15562 -1.98 0.25 3.13
EUR/USD - US$ per Euro 08/10/2012 1.2975 -0.48 0.67 0.16
EUR/GBP - £ per Euro 08/10/2012 0.8093 0.17 1.3 -2.87
IBEX 35 08/10/2012 7891 -0.8 1.37 -7.88
Crude oil (Light Sweet) Composite 08/10/2012 8995 0.06 -2.61 -9.14