The financial world witnessed the quickest weekly movements in financial and capital markets either upwards or downwards. In my last published article 'Financial Markets - Fast and Furious: US Drift' the quick declining phase hung the global markets in dilemma. The US financial conditions tend to have a ripple effect throughout the the global financial markets as a whole, as the recent US financial crises has shaken the markets world wide.
Going forward, As on Sep.'16 US Fed meeting, The Federal Reserve kept the federal funds rate unchanged at 2 percent, Federal fund rate is the interest that banks charge on overnight loans. The fed took the stable decision in this quick moving scenario, despite some voices advocated the rate cut as a quick short term fix to financial markets crisis. Short term quick solutions usually applied as the last alternative available and usually with the high degree of risks involved.
The markets react positively on the stable stance taken by Fed. this also help Fed to keep its useful weapon 'Interest rate cut' for the future use, in case financial crisis remain. Fed recognized and responded that the strained financial markets going through the tough face and also assured that they are keeping close eye on every move the markets make. Further, The central bank said it also remained concerned about inflation pressures
Also federal government is working to establish a Bailout plan, that will going to buy up distressed assets and to allow banks to get soured mortgage-related assets off their balance sheets. The approach adopted here is to improve fundamentals of financial institutions to benefit from rising share prices. This would likely to cost billions of dollars, but the initial reaction to the government recommendation got a positive response from institutional sector.
The US SEC (Securities and Exchange Commission) is temporarily banning the short-selling of nearly 800 financial stocks. in an attempt to limit the downfall in financial stocks. The UK already took similar steps to limit short-selling on Thursday Sep'18. The Australian Securities and Investments Commission banned covered short selling of all listed shares on Sunday Sep'21, following moves by other countries to ban short selling of financial stocks. Different arguments follows these bans, which seems to have the pull out the share prices from the lowest bottoms in the short term. These bans are being used as quick stability measure and will not stay for long.
Just after midnight Saturday Sep'20, The bankruptcy court approved a plan under which Lehman Brothers will sell its investment banking and trading businesses to the British bank Barclays. This transaction is viewed in respect of its benefits to the economy, by continuing a business and also by retaining present employees in the U.S.
The decline in the price of oil was one of the few good pieces of economic news lately, It rose Friday to $104.55 per barrel, but that was still well below the July 11 high of $147.27. The drop eases inflation fears and takes pressure off the trade deficits.
In conclusion, the markets try to stabilize after the quickest fluctuations with the active government intervention. Inflation is the crucial factor to watch for and short term equity trading is highly unpredictable. Wait and watch global markets trend and the buying can be considered on dips after the specific trend settles in the markets.
