What a week it was..........no words to describe it........
On the weekend (i.e. 13 and 14th Sep) , ppl were just thinking about Hurricane IKE and ******booom****** there came in Lehman Brother's bankruptcy. The weekend started with ppl expecting some solution for Lehman Brothers however talks with BankAm and Barclays failed and surprisingly Merill L was bought and ppl were guessing what will happen to the citibank of insurance sector - AIG.
With this $ started on a weak note for the week and commidities surged higher. Insititutions all over the globe were reluctant in lending to each other.... taking overnite $ lending rates higher........ and high volaitility in currency and commodity markets.... Markets were surrounded by high uncertainity and high volatility.
Dowjones dropped heavily as investors sold stocks & $, while investors preferred safe havens........ this led to gold making its highest one day gain ever and curde surging higher.......
Looking at this situtation central banks all over the world (esp. G7 Nations) stepped in to ensure that there is no panic in market. AIG was provided $ 85bn loan by Fed for 2 years in exchange for it 79.9% stake. On the other hand liquidity was provided, short selling was banned and market was ensured that Central banks will be there no matter what may come. Co-ordinated efforts were made by G7 central banks to proived ample liquidity. Fed came up with a rescue plan- to create a fund to absorb all illquid assets with financial institutions in US..... it also guaranteed money mkt funds........
These steps ensured confidence in markets and financial insititutions..... the result commdities were sold and $ bought.
However in the end, $ ended on a weak note and commodities and equity markets on the +ve side.....
On personal front..... i ve not seen such volatility in commodities in my 8 years of fin mkts experience...... but I can easily conclude..... that with elections this year in US..... the US fed govt will ensure that their markets dont weaken any further and same for the $..... remember its and election year and the US govt will goto any extent to stabilise the market no matter WHAT MAY COME........
Technically speaking.... I feel gold and more upside to come rather than downside and currencies like eur and gbp are in a corrective mood. Max Downside for gold seems to be @ 825 and thn 736......both imptnt lvls for gold........ as said eur is in corrective mode and except some weakness in $ for cumin week.....crude should touch 110/112$ per barrel....... Eur should reach 1.4700 for the next week. One thing is for sure.......... MARKETS WILL REMAIN HIGHLY HIGHLY VOLATILE....... so be aware of either side movements in fin mkts.....
So have a Safe trading week......
Hitesh Bafna
