U.S, Brazil, Mexico Surge; Rates to Zero

123jump.com Staff
16 Dec, 2008
New York City

U.S. stocks rallied on the hopes that lower record rates will spur economic activities. The Fed has expanded its balance sheet by 200% in the last eighteen months and promised more lending by printing money. The tentacles of Fed have spread in many sectors of the U.S. economy.

4:30PM New York, 10:30PM Frankfurt, 7:30AM Sydney[R]– U.S. stocks rallied on the hopes that lower record rates will spur economic activities. The Fed has expanded its balance sheet by 200% in the last eighteen months and promised more lending by printing money. The tentacles of Fed have spread in many sectors of the U.S. economy that will fuel inflation in the near future.[/R]

Global Markets

The Fed cut rates to the lowest level possible and raised prospect of lower prices and providing more liquidity by printing money. The Fed lowered the key lending rate from 1% to a range between zero and 0.25%. Financials and insurance companies rallied as stock indexes jumped more than 3%. The Fed is pursuing a dangerous path previously followed by former Chairman Greenspan between 2003 and 2005 which fueled housing market bubble that ended with the demise of large banks and investment banks.

UK inflation drops to 4.1% in November on a decline in energy prices. But, volatile food and produce prices jumped. Energy stocks rose after Iran and Venezuela favored production cut to support oil prices. Mining companies declined after Xstrata suspended production at a mine in Australia.

In Tokyo stock indexes fell 1.1% ahead of the rate decision in the U.S. Market also awaited for clues from earnings of Goldman Sachs. Toyota Motors is expected to seek price reduction from steelmakers as early as January. Mitsubishi Corp acquired 4.6% stake in AEON and develop business in Japan.

Hong Kong stocks edged up on the hopes that China will provide more incentives for insurance sectors and lower taxes for vehicle purchase. China Cosco, ocean freight company reported hedging loss of Rmb4 billion. Automakers and insurance companies led the gainers in trading.

Mumbai trading sentiment was lifted on a rise in foreign investment in financial markets. December month investment rose to 2,181 crore rupees. Foreign direct investment in October dropped 26% but is still expected to reach $35 billion according to the commerce minister Nath.

Australian market averages plummeted led by Macarthur Coal after the company lowered its first half profit forecast. Macarthur Coal dropped 22% on the new estimate and lowered estimate. Stock market index dropped 1% on the weakness in mining sector.

North American Markets

Dow Jones Industrial Average gained 359.61 or 4.2% to a close of 8,924.14, S&P 500 Index increased 44.61 or 5.14% to 913.18, and Nasdaq Composite Index surged 81.55 or 5.40% to close at 1,589.89. In Toronto, TSX Composite Index raised 262.28 or 3.1% to 8,724.11.

Of the stocks in Dow Jones Industrial Average 30 increased.

JP Morgan Chas led gainers in the Dow with a rise of 13% followed by increase in Citigroup Inc of 11.2%, in Boeing Company of 8%, in Intel Corp of 7.2% and in Bank of America of 0.7%.

Of the stocks in S&P 500 index, 484 increased, 15 decreased and one were unchanged. Of the index stocks, 2 fell more than 3%, 413 closed above 3% and 77 rose more than 10%.

Lorillard Inc led decliners in S&P 500 index with a fall of 4.7% followed by losses in Altria Group Inc of 4.4%, in Tenet Healthcare of 2.4%, in Eaton Corp of 2.2%, in Eaton Corp of 2.2% and in Reynolds America of 1.8%.

XL Capital Ltd led gainers in S&P 500 index with a surge of 27% followed by increases in Genworth Financial of 24.6%, in Hartford Financial Services of 24%, in Apartment Investments of 22% and in Prudential Financial of 21.1%.

South American Markets Indexes

Mexico led gainers in South American region with a loss of 4.7% followed by increases in Brazil of 4.4%, in Argentina of 2.54%, in Peru of 2.4% and in Chile of 0.5%.

Venezuela declined 1.3% and Colombia dropped 0.13%.

Europe Markets Review

In London FTSE 100 Index closed higher 31.52 or 0.74% to 4,309.08, in Paris CAC 40 Index increased 66.00 or 2.07% to close at 3,251.66 and in Frankfurt DAX index higher 75.09 or 1.61% to close at 4,729.91. In Zurich trading SMI increased 40.60 or 0.73% to close at 5,567.14.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 96.64 or 1.12% to 8,568.02, Hang Seng index in Hong Kong increased 83.26 or 0.55% closed to 15,130.21 CSI 300 index in China higher 19.42 or 0.98% closed to 1,994.45. ASX 200 index in Australia decreased 35.20 or 0.98% to close 3,556.20. The KL Composite index in Malaysia higher 8.33 or 0.98% closed to 854.80.

The Kospi Index in South Korea increased 3.37 or 0.29% to close at 1,161.56. SET index in Thailand closed higher 8.25 or 1.89% to 445.31 and JSE Index in Indonesia decreased 16.44 or 1.21% to 1,342.84. The Sensex index in India increased 144.59 or 1.47% closed to 9,976.98.

Commodities, Metals, and Currencies

Crude oil decreased $0.91 to close at $43.60 a barrel for a front month contract, natural gas increased 11 cents to $5.75 per mBtu and gasoline futures decreased 0.31 cents to close at 104.00 cents per gallon.

Wheat futures closed up 24.00 cents in Chicago trading and closed at $5.44 a bushel. Sugar increased 0.15 cent to 11.67 cents a pound. Soybean future closed up 13.5 cent to $8.63 a bushel.

Gold increased $6.20 in New York trading to close at $842.70 per ounce, silver closed up 8 cent to $10.705 per ounce and copper for the front month delivery decreased 2.65 cents to $1.3785 per pound.

Dollar edged lower against euro to $1.3701 and fell against yen to 88.976.

Yields on 10-year U.S. bonds decreased to 2.26% and with 30-year maturities decreased to 2.74%.