Brekky Edition 13/12

[300]

http://www.radioaukiman.com/images/misc/300finance .jpg

The US retraced it's steps overnight on news that the US and other central banks are going to join forces and work through the credit crisis and was up over 270 points. However, over the course of the day, investors became unconvinced and to top it off there were more profit warnings from other internal financial institutions (Bank of America being one) that send the Dow Jones south to end up only 41 points up. The realisation that with every good news story, there is a touch of reality announced pretty soon after. However, it sounds like a plan, given that if the US does hit a recession, the rest of the world will feel pain and getting everyone to join forces should be the right course of action. It is the action that will be the important bit!

The ASX dropped sharply yesterday morning (as a result of the US news) but had a recovery during the rest of the day and ended up only 30 points lower.
Just my 2 cents

[mikki]

is this because everything is measured against the US dollar? especially price of oil and things like that?

[sonic]

yeah good point, and I have noticed petrol is on the rise :(

[300]

is this because everything is measured against the US dollar? especially price of oil and things like that?


It does seem that way. The US has one of the largest consumer spending economy on earth. Given their love of possessions, cars, bling, etc.. If the US hits a recession, this will by definition, mean that there will be less jobs which make people scared and save more because not so many are working, which will lower demand for imported goods - as in the ones from China. China see the lack of demand as their warehouses start stockpiling goods and they in turn stop making as much. Their global orders for raw materials slow down and here in Australia we see job cuts in our mining and resources sectors. Getting a little more 6-degrees-of-separationish, the industry superfunds that invest in the stock markets and with the current trend of resource stocks outstripping the performance of financial stocks and others, start to take a hit because profits start getting downgrades. This spooks local investors at the same time and (to generalise) no one wants to invest in stocks especially when they are not doing well, so with the lower demand will come lower prices - and we too start to head down a road of economical pain.

Hope that makes sense? Now, onto today's update.