Markets Across Atlantic Soar 3.5%; Oil Above $100

Bikram Pandey
30 Nov, 2011
New York City

Indexes in U.S. and Europe soared more than 3.5% after six central banks coordinated actions to offer more dollar liquidity at lower interest rate. Banks and commodities surged. The Fed

[R]5:00 PM New York – Indexes in U.S. and Europe soared more than 3.5% after six central banks coordinated actions to offer more dollar liquidity at lower interest rate. Banks and commodities surged. The Fed’s move was widely interpreted by Main Street as another bailout of banks as Fed prints more dollars.[/R]

The U.S. indexes soared after central banks of Europe, UK, Canada, Japan and Switzerland took a coordinated actions to ease liquidity crunch and lower rates for dollar swap lines by 50 basis points.

The Fed and the European Central Bank coordinated the action to provide additional funding to central banks at a fixed exchange rate that could be repaid at a later date.

The move was seen as endorsed by the White House because only a day ago President of the European Commission Jose Barroso and other European leaders met with President Barack Obama.

The move was welcomed by investors and banks and broader market indexes shot up more than 3.5% in the Europe and in New York. However, common man was surprised by the Fed’s generosity to Europeans when the U.S. homeowners are struggling with foreclosures and high unemployment.

Increasingly, the move by the Fed is viewed as another bank bailout in Europe and the money will never reach the struggling economies in the euro zone. The Fed and other central banks are treating this as a liquidity crisis when what most economies and banks in Europe are facing is a solvency crisis.

The move, though welcomed by the investors, does not address the root cause of the crisis in the euro zone where most nations including Germany are carrying far too large debts than their economies can support and have weak growth to support large government budgets.

In other news, U.S. private sector added 206,000 jobs in November but mortgage activity declined.

In earnings news, American Eagle said third quarter net increased 6.3% to $52.4 million. Jos. A. Bank Clothiers reported quarterly net rose 19.3% to $15 million. OmniVision second quarter net slipped to $21.1 million. Ralcorp fourth quarter net loss in the quarter swung to $370.1 million.

European indexes soared and finance ministers in the region sought the help of the ECB and the IMF to increase the fund size to €1 trillion. Greece won the approval of its next tranche of loan worth €8 billion. S&P belatedly lowered ratings on 15 financial institutions.

Euro area inflation remained steady but above the central bank target and German unemployment fell in November. France's consumer spending was flat, the jobless rate in Italy and retail sales in Norway increased. Sweden's current account surplus rose.

The UK indexes soared on coordinated central bank action. Normal life paralyzed in Britain after public-sector workers and teachers went on a strike to protest austerity measures. UK housing equity injections rose in the second quarter.

The Nikkei index in Tokyo halted a rally of three days as Japanese banks were included in the latest worldwide downgrade of banks. Shipping companies continued to slide and steelmakers were for the second week in a row. Pioneer Corp surged 7% on the hopes of earnings recovery.

Australian stocks edged higher and business investments surged at a record pace in sixteen years and mining companies race to complete $232 billion of projects. Home prices declined at a faster pace in Melbourne and Brisbane in October.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed up at 2.08% and 30-year bond increased to 3.07%.

The U.S. dollar fell 1% at $1.34 to one euro and closed lower against the Japanese yen to 77.52.

Immediate delivery futures of Texas crude oil increased $0.57 to $100.36 a barrel and futures of natural gas decreased 6 cents to $3.56 per mbtu and gasoline prices increased 2.86 cents to 256.77 cents a gallon.

In metals trading, copper increased 18.9 cents to $3.57 per pound, gold added $33.00 to $1,751.90 per ounce and silver gained $0.98 to $32.93.