This is my first post for three weeks, due to a combination of not much to talk about and returning to work after a months holiday. But this week could be a turning point. The rise in the markets since March 09 has been remarkable. I feel it has been due in a large part to all the liquidity created by the governments. The banks did not want to lend it out so they traded with it. The Banks are not out of the woods yet and this request from Dubai has reminded people just how fragile the recovery to date is.
Over the last couple of weeks the FTSE bowled over the 5300 level and in this last two weeks came close to breaking the 5400 mark. But that was all before Dubai asked for an extention of time to pay their repayments on some 80 Billion dollars. This happened while the US was closed for Thanksgiving. Asian and Europe fell by arount 3%. The US fell by a lesser amount by the end of trading on Friday (1.5% to 1.75% in round figures).
Black Friday (so called as it is the day when retail stores move from the red into the black for the year), is usually a very quiet day for the markets in the US as most brokers and traders take Friday off to make a long weekend, but not this year.
The concern unsettling the markets is not so much whether Dubai will default on its loans, but what the knock on effect might be. This may be a finger of instability, where one small event can start larger events. Think of an avalanche.
This week the US released the initial unemployment figures on Wednesday, and there was much hype that the figure was under 500,000 for the first time in a long time. But wait… the figure was “seasonally adjusted” the actual initial unemployed was 543,926. So keeping in mind the high unemployment it will be interesting to see how the festive season pans out for the retailers. I suspect many more consumers are worse off than this time last year. Will this reflect in the holiday shopping figures, or will people believe all the talk that the recession is over and spend up large? We will have to wait and see.
This entry was posted
on Sunday, November 29th, 2009 at 2:03 pm and is filed under Trading.
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