Fed Rate Watch (30-01-2008)

Wall Street retained its optimism regarding the eventuality of the Fed cutting rates further after its two day meeting, especially as the sharp fall in new home sales report increased the chances of it happening. The main indices finished in decently positive territory, also helped by the sharp rise in durable goods orders in December, as stated by the Commerce Department. Perhaps the most significant data of the week will be released two days after the Fed announced its decision.

Asian stock markets, on the other hand, were trading in negative territory in today’s session led by South Korean shipbuilders as well as Japanese power producers; these were falling as worry persists over slowing global growth and rising fuel costs. Banks were also pulling back on renewed uncertainty over the effects of the subprime market troubles. The Nikkei lost almost 1% and Hong Kong closed with losses of over 2.5% having recovered from late afternoon lows of around 4%.

European markets have also been consistently lower since early morning trading. The writedowns announced by UBS and BNP Paribas are putting pressure on banks. The auto industry also came under pressure after Goldman Sachs said the slowdown in the global economy will be instrumental in reducing profits in the sector by an average 25 percent.

Back on the other side of the Atlantic, markets were moving slightly lower at around 11:30 GMT on the upcoming decision of the Fed, but also under the cloud of yesterday’s disappointing results by Yahoo.

Source: ISFM