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| US stocks surge on 'watershed' rise in the dollar |
| 2008-08-09 |
| US stocks soared on Friday as the dollar saw its biggest one-day jump against the euro in eight years and oil prices plunged. The moves marked a key reversal of a trend that many investors had followed profitably for months -- betting that high commodity prices would keep the dollar weak. The dollar reached its highest in five months against a trade-weighted basket of currencies, while oil fell more than $5 to $114.87, 22 per cent below its record high of $147.27 last month. The S&P 500 closed 2.4 per cent higher in New York. The shift in sentiment was triggered by Jean-Claude Trichet, president of the European Central Bank, who warned on Thursday that third-quarter eurozone growth would be "particularly weak". This sparked talk that the ECB would be forced to abandon its hawkish policy stance and start cutting interest rates, thereby weakening the euro. "This is the watershed week for the US dollar," said Marc Chandler, currency strategist at Brown Brothers Harriman. "The magnitude of the dollar's moves and the breaking of key technical levels suggest that a major shift in the outlook towards the dollar is occurring as massive positions are adjusted." Other analysts described the widespread buying of dollars as "capitulation". The dollar hit a five-month high of $1.5055 against the euro and climbed 1.3 per cent to $1.9189 against the pound -- its strongest since November 2006. Traders said the violence of the move was testimony to the extent to which the market had been surprised by economic weakness outside the US. "Mr Trichet was unable to convince the public that the ECB had not been surprised by the eurozone's economic downturn," said Ulrich Leuchtmann at Commerzbank. "Therefore, the last remaining rate hike expectations were taken off the table." UK economic data has shown increasing weakness this week; officials in Japan warned that the economy was headed for a recession; and the Reserve Bank of Australia said it was planning to start cutting interest rates to head off an impending economic slowdown. |
| Posted by:lotp |
| #14 One Word: For Ship, 1000mg/day. For the rest, stocks. |
| Posted by: ed 2008-08-09 19:53 |
| #13 lotp, you channeling muck4doo these days? |
| Posted by: Hupiling the Galactic Hero1106 2008-08-09 19:42 |
| #12 ROFLMAO, that's muh gig. |
| Posted by: .5MT 2008-08-09 14:18 |
| #11 For .5MT: |
| Posted by: lotp 2008-08-09 14:02 |
| #10 Why JIB, why even bother making a major investment in anything, anywhere. Buy gold, platinum or Tritium if you can get a license. Don't get caught with FIAT money WTSHTF if you catch my drift. Also Old Masters are a good investment but a good factory Cuban is even better, again if you can get a license. Yep, Whiskey, ammo, antibiotics, fishhooks and enough diesel to power your typewriter that a small sliver of western civilization might live thru the coming age of low gravity. Mark my words, things gonna get ugly, then worse, hell dirt sandwiches will be something only the rich elites can afford. Buy my book, borrow my agenda. Send your worthless FIAT money to me. |
| Posted by: .5MT 2008-08-09 14:00 |
| #9 Too much pessimism in this thread for me. There is still lots of capital out there and whether they invest in America, Europe or Asia they look at risk and return. All you pessimists tell me if you had to make big capital investments with the lowest risk and the highest return where would you make them? China? UK and Europe? Middle East? USA? |
| Posted by: Jack is Back! 2008-08-09 10:43 |
| #8 Given that the 'old day's of Europe are not behind them, it was all a smug self important dream, money is going to move to more certainty. Regardless of shortcomings and deficiencies in the American system, its more secure geo-politically and contractually. The Americans are having a family fight about exploiting their own energy resources, the Euros have no similar domestic resources to tap. Puty made a reality wake up call. |
| Posted by: Procopius2k 2008-08-09 09:24 |
| #7 As the lefty writer Tom Robbins put it, "The situation remained the same, desperate as usual..." |
| Posted by: M. Murcek 2008-08-09 09:12 |
| #6 There is no flight to the $ because of fighinting in the FSU and the threat of lower EU interest rates. It's an illusion. We're doomed. Worst economy in 50 years, I had to feed a kitten this morning! Can you believe it? A kitten, hungry in this great country of ours! |
| Posted by: .5MT 2008-08-09 07:11 |
| #5 In other words, for the non-goldbugs amongst us, memememememe.... hummmm.... WE'RE DOOMED!All news, it is bad. |
| Posted by: .5MT 2008-08-09 07:09 |
| #4 What actually happened today, and has been happening for several weeks, is that the short people have had to retrench. It took just a few of the bigs bailing out of the petroleum futures market to cause the short sellers to have to respond to margin calls, and they are still digging up cash to do so, so there is a temporary reversal of fortunes. Note that all that has occurred is a slowing of shorting - there isn't any huge amount of cash flowing into long positions. The owners of the equities sold short have a cash surplus due to the margin calls on the shorties, so they are buying bargains on the Street, but that is all that has happened. The fundamental problems caused by a hyper-inflated housing market contracting haven't played out yet, and may be only a third through that agony. |
| Posted by: Rivrdog 2008-08-09 03:20 |
| #3 Investors are more likely now to invest in potentially lucrative technology stocks rather than in developers of luxury condos. The Game industry is under acceleration. Potentially, there could be another computer technology boom. Restaurant chains are closing, but - as usual - Deli stores boom in a recession, as consumers search for lower cost luxuries. Smarter consumers make a better economy. |
| Posted by: McZoid 2008-08-09 03:13 |
| #2 Two words: irrational exuberance. The US banking system is still upside down with huge portfolios of worthless mortgages, and guesses as to how much range from a very mild trillion dollars to as much as three trillion, and if bad paper handling does not improve for the banks, double that to six trillion. How the dollar does on the ForEx is strictly ceremonial. At some point, everyone will realize that there isn't enough money in the entire GDP to carry the busted banks, then said institutions will not be able to hide their condition behind Bernanke & Co any longer. A US economic crash WILL severely damage the world's economies, because we ARE tied to all of them, but the reverse is NOT true, and there is no way those central banks can save the US banking system. Hang on, it ain't over 'til it's over. |
| Posted by: Rivrdog 2008-08-09 03:11 |
| #1 "the violence of the move was testimony to the extent to which the market had been surprised by economic weakness outside the US" For better or worse, the US economy IS the world economy. We catch a cold, other countries get pneumonia. Economic weakness outside the US never surprises me. |
| Posted by: Barbara Skolaut 2008-08-09 01:13 |