Tuesday, October 14, 2008

DJIA Rebounds

Stocks had an excellent day today up over 11% on the day. This moved followed a similar move by Asian and European stock markets and coupled with Latin American markets all up similar amounts. So now we need to see some follow through and I think the only way we see that is to see some action coming out of the Central Banks.

Once again all the major market moving news began over the weekend. The news thou had little to no concrete details.

The CB's will use "All available tools to support systemically important financial institutions and prevent their failure" while also stating that

Financial institutions will "Have broad access to liquidity and funding".

This signals to me that another Lehman situation is not in the cards. I think the Fed learned from allowing Lehman to fail that the consquenses are worse then bailing them out. This is what really caused the confidence problem.

In Europe the ECB agreed to guarentee until the end of 2009 bank debt inssuance with maturites up to 5 years, allowed governments to buy stakes in banks and committed to recapitalise critiscal banks in distress.

Australia and New Zealand offered guarantees on all bank deposits

These are all very good steps and I hope enough to stabilize the markets. It looks to me as the risk is that markets get disappointed once specific details are released. Lets hope not.

Good Luck and Good Currency Trading.



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