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Video for November 24th, 2008 (4 min): Equity Markets and Carry Trade Rally as Citigroup is Bailed Out by US Gov't

Global equities Continue Friday's Rally, US Plans to Rescue Citigroup

The Dollar was lower today against most major counterparts as global equities rallied, increasing risk appetite and diminishing the Dollar's safety-haven status. Also, the US government laid out a plan to rescue Citigroup which helped calm financial markets.

GER IFO Business Climate Index Falls to 15 Year Low

But first we begin in Germany, where business confidence slumped to a 15-year low in November, as weaker global activity hurt German exports and other sectors. The business climate index dropped to 85.8 from 90.2 in October. Orders are declining, forcing companies to scale back production. The data puts extra pressure on the ECB to act by lowering interest rates another 75 basis points in their next meeting. 

EUR Industrial New Orders Plunge 3.9% in September

In the Euro-zone as a whole, industrial new orders fell 3.9% in September, a larger than expected decline, while August's orders were revised down to a -1.5% change. It is a reflection of a weak demand for large capital goods, and means that firms are not investing in large equipment in the face of the global slowdown.  

EUR/USD - Euro Rallies Through Key Resistance Levels as Stocks and Risk Appetite Rallies

 

The Euro-Dollar hit a low near 1.2570 following the German business climate report, but rallied strongly afterwards, rising almost 300 pips to the 1.2880 level. The US announced on Sunday that they would be bailing out Citigroup with a 20 billion dollar injection of capital and guarantees for around 300 billion dollars worth of bad assets. The news was received well in global equity markets, which helped instill some risk appetite to currency markets, while pressuring the Dollar.

GBP/USD - Pound Jumps 300 Pips on Dollar, New Stimulus Plan Unveiled

 

The Pound-Dollar rose to 1.5175 a climb of 300 pips form its intra-day low, reversing the declines seen late last week. The British government unveiled a 20 billion pound economic stimulus plan, centered on the reduction of the sales-tax to 15% from 17.5%. Stocks in London were up almost 10%, helping to boost the Pound in the late European and during the NY trading sessions.

GBP/JPY - UK and European Stocks Surge Today, Carry Trade Sees Some Appetite

 

The Pound-Yen surged as well extending Friday's rally to more than 800 pips. The DJ Stoxx 600 index, a measure of overall European stocks was up 8.4% after hitting a fresh five-year low on Friday. European markets reacted positively to a report that President-elect Barack Obama would nominate Federal Reserve President Timothy Geithner as Treasury Secretary and the plan by the US government to rescue Citigroup. The Euro and Dollar were up on the Yen as well.

USD/CAD - Oil Prices Rise, Loonie Pares Last Week's Losses

 

Another big gainer during this time of risk appetite was the Canadian Dollar. Oil prices rose above $54 a barrel and the Dow Jones index climbed more than 300 points by noontime. With investor sentiment rebounded to start the week the US Dollar-Canadian Dollar plunged almost 500 pips in favor of the Loonie, reversing the rapid climb last week that was fueled by sharp equity losses around the world. The pair bounced off the 1.2240 area

US Existing Home Sales Down 3.1%

Existing-home sales declined on the heels of a strong gain in September as uncertainty and economic concerns increased in October, according to the National Association of Realtors. Existing home sales fell 3.1% to a seasonally adjusted annual rate of 4.98 million, lower than expectations. The news, though weak for the housing sector, did not factor into the trading today.

Tonight's and Tomorrow's Releases

Tonight, Australia releases leading index and Japan posts its corporate service price index along with its monetary policy report. Overnight, Germany releases its consumer confidence and the UK posts data on mortgages and business investment.

Tomorrow morning, the US releases its second release of GDP, two measures of housing prices, and a report on consumer confidence. Canada will post retail sales for September.