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 Return Analysis
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World Financial Markets Summary for September 24th – October 3rd, 2007.
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All stock indexes are rising. The dollar is falling. The situation with the USA economy is not clear, but the rate may be reduced once more by the end of the year. The speculative heat of the markets has increased. The Dow Jones Index reached a new record level of 111 points. Gold reached 747 dollars per ounce, crude oil – 84 dollars per barrel. The stock indexes of the developing countries and Russian have been growing.
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The mortgage crisis has retreated for a while and investors and speculators have begun to invest in shares the money, previously invested in government stocks. The expectation of the further rate reduction creates conditions for a stable growth. However, a correction, through temporary, is just around the corner. It has already started for crude oil and gold and slowly for the stock markets. The Asian markets are already experiencing profit taking, the same should be expected from the markets in Latin America. We should particularly state the meetings of the ECB and the Bank of England, which will announce their resolution on the rates on Thursday. If rates remain unchanged, the European indexes will receive a sufficient basis for growth. A particular attention is paid to Trichet, who is expected to give comments on the high Euro rate, which might hinder the development of the European economy.
According to the former head of the U.S. FRB, Alan Greenspan, it is necessary to strictly control the inflation, for which the FRB shall raise the rate and not reduce it. Instead, they simply use the printing machine, the economy is flooded with cheap money, which leads to new market "bubbles" and inflation growth. But it is this model, which the USA has been using for the last twenty five years and it would be strange to expect any other actions with the ongoing mortgage crisis.
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