GM | World Market Update

USD Weakens as Risk Appetite Returns

March 16th, 2009

GBP up after UK equity markets rally

Sterling has experienced some appreciation against the benchmark dollar for the last few days. Surprisingly under some of it’s own steam after UK equity markets rallied but the long-term trend is still undoubtedly to the downside. Last week saw the Bank of England successfully initiate it’s much talked about quantitative easing program with the purchase of £10.5 billion of government gilts. The UK government and policy makers are clearly taking their responsibilities seriously in an attempt to correct the economy’s deep slump. This is in stark contrast to the Eurozone’s inability to produce solutions suitable for the fragmented region while Japan faces political problems in passing the necessary aid. While these other regions face problems that are as yet undefined, traders have found it easy to focus on the grim prospects for the UK economy which may have resulted in the pound being oversold. The week ahead plays host to significant fundamental numbers. The key event will be Wednesday’s combined release of the BoE minutes and employment data. BoE Governor King has sounded pessimistic in his recent comments on the state of the economy so traders may be looking to offload more GBP ahead of the mid week minutes. Read Full Article »

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USD Enjoys Yet Another Risk Averse Rally

March 5th, 2009

Plenty of Negative News for Financial Markets

The USD index is up more than 0.6%, and yesterday’s rally in equities appears to have been stopped dead in its tracks by growing doubt at GM that the storied automaker can remain a going concern if it cannot generate cash and stop the bleeding of red ink in very short order. Contained within the filing of its 2008 annual report to the US Securities and Exchange Commission, GM stated that there is “no assurance that the global automobile market will recover or that it will not suffer a significant downturn.” The firm has requested access to $30 billion USD in emergency funding from the federal government just to survive the coming period, and with sales of its product continuing to plummet around the globe, the situation couldn’t be more dire. GM stock is trading down more than 7% ahead of the opening bell. Read Full Article »

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Obama Projects $1.75T Deficit

February 26th, 2009

Fiscal Plan Includes $750B More for Banking Sector

President Obama and the US Treasury are set to release their budget for 2010 this morning at 11am EST and Washington insiders are forecasting a fiscal shortfall of $1.75T USD, which would represent 12.3% of US GDP–the largest deficit since the conclusion of World War II. The plan is said to include an additional $750B for the ailing banking sector, to be set aside in the event that more capital is required. It is also rumoured to include $635B in health care funding spread over a 10-year period to bring about Obama’s reforms in addition to the pre-approved $737B economic stimulus package already passed by Congress. As part of the plan, Obama will seek to reduce the deficit to $533B, or 3% of GDP, by 2013, though these efforts will likely fall short of Republican desires with respect to fiscal restraint. Though it is difficult to accept the Republican Party as the voice of fiscal responsibility in the US given their record over the last eight years, it is clear that the G.O.P. believes such a party line to be their best hope of unseating the immensely popular Obama in four years’ time. In any event, the overriding theme of the budget is clear. The US is going to borrow and spend at record rates to attempt to revive the ailing economy and will stand at the ready to deploy hundreds of billions within the banking sector should it be required. Read Full Article »

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Big Auto Clamours for More Cash

February 18th, 2009

GM and Chrysler Decline

Tuesday marked the deadline for both GM and Chrysler to submit reports to the Obama administration outlining their efforts at cutting both operational costs and their massive debt loads, and specifying their prospects for viability going forward. Chrysler came through with a request for an additional $2 billion (to a total of $9 billion) in aid from the US government, of which they have already received $4 billion. They also said they need to eliminate another 3,000 jobs, bringing total cuts to 35,000 since last year. The nation’s third largest automaker has also pledged to reduce the number of models it offers, slash production capacity, and renegotiate its union contracts. Read Full Article »

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Event Risk Drives Market on the Day

February 10th, 2009

Financial Reports and Subsequent Corrections Reverse Market

Last night’s Asian session began with two reports that drove risk-averse sentiment in early trading. First, CNBC reported that the US Treasury Department would be dropping the “bad bank” model from its financial bailout package, and that they would no longer be creating a vehicle to purchase toxic debt instruments from the banking sector. This report was subsequently denied (a few hours later) with clarification that an “aggregator bank” would be created via a public-private partnership to accomplish just this end. In case you’re wondering, the difference between a “bad bank” and an “aggregator bank” only seems to be educational background of the individuals coming up with the spin. Read Full Article »

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