Major Market Movers: BoJ Holds Rates

The rally continues, indices resumed its falling behavior for the second consecutive day, but today the Asian indices managed to incline for the first time in four says not tracing US session even when the Bank of Japan decided to hold rates steady at 0.30%.

The Bank of Japan governor believe that holding rates at the time being is the most suitable solution as they are have the lowest rates compared with all the world economies; the governor added that they would be injecting money into markets just to snatch the economy out of recession where the fell in one in the past quarter.

The governor came out after the decision to add that their rates are too low to even consider any rates cuts saying 'Mindful of risk of lowering rates further', which leaves us with a slim chance of reduction in the upcoming period because lower rates would harm the economy instead of bolstering it, he also said that 'rates change wont resolve all imbalances'.

The free fall taking place in the Asian markets especially in the Japanese Nikkei index which lost 48.32% since the beginning of the year had pushed the Japanese Finance Minister to say that they are looking for suitable solutions which could boost the index once again to recover the fall seen. After those comments Nikkei Index managed to incline a total of 2.70% from the earlier looses, which was also followed by Hong Kong's Hang Seng Index gaining 2.83%.

In other type of interventions the Reserve Bank of Australia decided yesterday to buy back Australia dollar just to stop their dollar from continuing to fall down, the spokesman confirmed that they bought back their currency adding that they would be injecting those money into the economy in future occasions.

The comments added by the Japanese Finance minister boosted the stocks markets where investors returned back to buy back the high yielding assets which helped the Japanese to retreat back against the US dollar as it's currently trading at 94.98 levels from the earlier high recorded at 93.65 levels. The Yen also eased slightly against the Euro and the British pound giving them some chance to incline after they faced losses in the past two days, carry trades might resume if the comments made by the finance minister turn out to be true.

Lets just leave Japan with their rate decision and move a bit back in time; yesterday the initial jobless claims came out surpassing all expectations, clearing that more softening in the US unemployment rate would continue. Not only unemployment the Philadelphia feds which is a gauge of the manufacturers' outlook fell to worse than the previous and expectations reaching to 39.3 levels in November.

A stall in the manufacturing sector is obvious, the decline in the demand levels due to huge number of jobs termination had reduced the household income which resulted in narrowing down the levels of spending leading to cripple the economy expansion, pushing it to face a wider contraction in the current quarter.

Weak data along with falling confidence continued to weigh upon the US indices, the Dow Jones Industrial Average fell 5.56% or 444.99 points reaching to 7552.29 levels, the S&P500 fell the most down to 6.71% or 54.14 points to reach a total fall of 48.76 since the beginning of the year; also NASDAQ fell 5.07% or 70.30 points reaching to 1316.12 levels.

But the retrieved risk appetite earlier today had helped the US future indices to incline in the early Asian session, the future Dow Jones Industrial Average gained 259 points to trade at 7746 levels; the future S&P 500 retrieved back 26.80 points reaching to 773.60 and Future NASDAQ inclined 33.00 points reaching to 1072.50 levels.

Awaiting Fundamentals

The news will start flowing from the European Union, Germany will be the first to release the news today; the continuous distress from the Credit Crisis which resulted in slowing the world's global demand had stalled the manufacturing sector in this industrialized economy.

According to market expectations, the PMI Manufacturing for the November will continue to contract reaching to 40.5 levels from the 41.1 levels, also the services sector will face a deeper contraction reaching to 45.0 according to the median estimate. The contractions in those two sectors have a large effect on the economy because they the bigger the contraction more the Germany will dip in a recession. Also we are waiting for the overall zone PMI Manufacturing reading with expectations that it would dip more in contraction levels along with the services especially now the downturn in the fifteen economies will continue to deepen in the upcoming period.

Moving to Canada; the slowing demand and the falling commodity prices will take prices down, according to estimates in markets the consumer prices fell in October by 0.6% from the previous rise of 0.1% and the yearly prices might move back down to 3.1% from the previous 3.4%. According to the bank of Canada the core CPI will ease to a flat reading on the month and but the yearly prices might incline to 1.9% from the previous 1.7%.

We have no US fundamentals today; they are taking break after this long hectic week, but they will continue to live the distresses as they economy is falling in a deep recession.

Crown Forex

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