It seems like another declining phase for the financial markets and investment options, as investors continued to worry about the dismal show by financial biggies. First the federal bailout or federal takeover of Fannie Mae and Freddie Mac for unexpected financial restructuring is the start of this year credit crisis among major and minor United States financial firms. Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).
If this wasn't much to hurt the sentiment of the markets, here follows the Lehman Brothers and AIG, this leads to panic and negative bias for financial and banking sector, which already struggling to sustain the bearish moves.
Bankruptcy filing by investment bank Lehman Brothers Holdings Inc (LEH.N) has created cascading fears about the stability of other major financial institutions and this tumbled global markets.
AIG, American International Group an insurer, and savings and loan company Washington Mutual (WM.N) are among other major companies investors fear are threatened by the credit crisis and may have to step up efforts to raise capital to shore up their balance sheets.
Reuters first reported that Goldman reversed its estimate for Lehman to a loss of $2.75 a share for the third quarter from an original estimate for profit of $0.68 a share. Going forward, Goldman saw the decline in Morgan Stanley's earnings per share at $0.85 from $1.10 seen earlier, and Merrill Lynch's third-quarter loss per share estimate was increased to $4.75 from $4.40.
Distressed Merrill Lynch, seeking a lifeline with its shares tumbling making new lows over the past year on fears of losses from the sub prime real estate meltdown and global credit squeeze, has been acquired by Bank of America in a quick deal. This deals make Bank of America as world largest financial entity in wealth management. Different contradictions laced with the deal.
The negative sentiment emerge for the US financial institutions created its ripples effect globally and the negative waves followed the world financial markets.
While financial sector problems has been expected to be countered by strength in oil services and other commodity stocks, when the crude hit below $100 mark, despite oil prices that sank below the $100 a barrel there seems no respite in capital markets.
As crude oil tumbled further, as on Tuesday Sep16' the crude has dipped below $92 a barrel in the biggest two-day drop in almost four years, many experts has concerned that this happened due to fall in financial markets and its adverse effects, that weaken the global economy and reduce demand. In my views the falling crude has also providing the positive boost for the short term in form of check on the inflation, as we know the the problems of financial markets begins with the rising inflation globally, and of course when the crude rising at new highs, the suppliers has pressure to increase their supplies in a systematic time pattern, so increased supply seems to be more authentic reason rather declining demand does. But the recession fear prevails in the financial markets.
Few market players view this drop in crude oil prices as an interesting opportunity for creating portfolios exposure with the oil marketing firms, yet in the short term.
Now the question emerge that, Is it just the financial instability..? or it's also the worsening economy. The factors affecting the economy includes interest rates, inflation, employment and GDP are the names a few. While the numbers shows the prevailing market sentiments.
Going forward, Financial markets are betting on an interest-rate cut by the Federal Reserve during this month, well it's not certain that the central bank will deliver it at Tuesday's regularly scheduled meeting of its rate-setting panel.The irony here is that, a month ago, the Fed signaled strongly that its next move would be to raise interest rates, not cut them. The analysts favoring rate cut citing that the economic and financial environment will not resemble the one at Fed previous meeting in August, just six weeks ago. We just wait and watch and look at the things after the Fed meeting give their opinion on current financial situation.
Presently we are witnessing the one of the quickest negative financial situation emerged, the pattern has not been set till now, nobody sure that the the markets will move toward downward trend or recover from here. As quick recovery has not expected yet but slow and sustainable recovery cannot be ruled out if the inflation comes to the acceptable standards.
As the bearish sentiment taking its toll on financial markets this also provide good valuations to built the position in certain deep discounted counters, with solid fundamental and expectations. So after research and analysis medium to long term investment positions can be considered in this scenario.
