Sunday, April 20, 2008

Key Global Triggers

Positive sentiments on Wall Street
Sentiment on Wall Street is clearly better than it was earlier this year. However, the market can rise only so much due to mediocre news - no matter how much investors have already priced in a recession.

UK Housing worsens
As mentioned in my previous posts, housing problem surfacing in UK markets. Bank of England would be issuing bonds in exchange of mortgage backed securities. However that does not tackle the fundamental problem of overvalued real estate. UK economy likely to go the US way to a large extent.

Wall Street Job Cuts
Large scale job cuts expected in wall street investment banks. Anywhere between 100,000 to 200,000 in the next 12 to 18 months

Dollar declines leads to higher profits for some
Declines against world currencies make U.S. products look cheap overseas, and translate into big returns when sales are converted back into dollars. Resulting in strong overseas profit for companies like Coca-Cola ,IBM, Google, Caterpillar, and eBay (all rallied this week because of strong overseas profits.)

US Housing to worsen
Mark Zandi of Moody's estimates that 10.6 million homeowners in US will have zero or negative equity by the end of June, or 21 percent of first mortgage holders. Banks and other investors in mortgages, will take further hits to their already weakened capital. This means a longer and deeper credit crunch. It will also mean a wave of new properties hitting the real estate market, driving prices lower still.

Bear Market rally expected in Europe
European stocks may stage a relief rally next week, with financials leading the way higher.

Global financial crisis
As per Government of Singapore Investment Corp, a global financial crisis and recession was increasingly likely due to spread of financial contagion beyond US.

: Oil prices hit a record high $117 a barrel