Daily - 12/03/2008 10:15
On Tuesday, March 11th, US benchmark indexes traded uptrend. Dow Jones adding 3,55%, closed at 12157; S&P 500 adding 3,70%, closed at 1320 points and, NASDAQ adding 3,98%, closed at 2255 points.
Fed and other central banks (European, Canadian, Swiss) announcing $200 billion liquidity to the markets to ease the squeeze in credit markets, have generated upturn in US benchmark indexes.
Markets expecting rate cut from Fed to rescue banks and housing credit providers facing losses due to bad loans written on financial instruments, turned up with the high liquidity injection by central banks. Fed not meeting needs of the markets at the previous rate cut and lack of way to cut rates further is probably the reason for this liquidity injection. Crude oil prices reaching $109,72 per barrel is another factor rendering rate cuts difficult although not causing inflationary pressure (Markets are expecting a rate cut of at least 75 bps from Fed, on 18th.)
While markets have been focused on bad loans of financial institutions and liquidity as a solution, January Trade Balance has been released as $58,2 billion, exceeding the previous level of ½57,9 billion. In this recent solution, bad housing loans will be considered warranty by the central bank and, will be provided liquidity with the condition of to be paid back to the central bank within 28 days. This new solution positively affected the financial institutions preparing to release Q1 earnings in a week. Morgan Stanley moved up by %9,69 and, Citigroup by %7,62.
With copper rising after the strike of four days in copper mines in Papua New Guinea, mining company Freeport Mcmoran appreciated by 7,02%. Exxon appreciated by 4,63% and Chevron by 3,74% as crude oil rose above $109 per barrel.
Eurobond Markets
Asian exchanges closing at positive levels despite the downtrend in US indexes on Monday boosted moral in emerging markets. Emerging markets opened with a horizontal trend, closed the morning session at positive levels with better figures of German ZEW Survey. Following Fed’s new lending project of providing $200 billion and increasing swap lines with European and Swiss central banks, markets kept appreciating. Mortgage backed securities accepted as warranty brought sales to t-bills and, US 10-year note yields rose to 3,62%; 2-year note yields rose to 1,77%. This news positively affected mortgage company bonds like Fannie Mae and Freddie Mac, narrowing spreads between US t-bills. European Central Bank member and German Central Bank head Axel Weber noted that in a milieu with record crude oil prices, the primary target is to keep inflation under control and, rate cuts would not be appropriate in a such situation. Following the statement euro broke a new record against USD while German t-bills were exposed to sales. As for the CDS, US t-bill risks exceeded German t-bills for the first time due to credit market risks.
Turkish eurobonds focused on foreign markets appreciated after Fed’s statements. Turkey 2030 benchmark eurobond adding 75 cents closed at 150 Usd; Turkey 2038 adding 1Usd closed at 94,50 Usd. 5 year CDS falling by 8 points traded at 272/275.
Russia: S&P updated Russia’s outlook to positive. This outlook after the election of new president might signal an upgrade in May. The news did not affected Russian eurobonds for the moment but would be considered positive news in medium term.
