Analysis

	International Financial Market from January 24th to February 4th, 2008.

The shock from the FRB actions is gradually fading away. The sharp rate drop by 1.25% within eight days resulted in rapid growth of the stock indexes, but it’s taken with less and less enthusiasm.
Moreover it has been found that one of the reasons for the hasty actions of the FRB since January 22nd was the intention to help Societe Generale get out of huge futures positions for 50 billion EURO (!). The bank capitalization at that time did not exceed 36 bln. dollars. But the FRB was more than a hindrance than a help to its colleagues. Immediately after that decision, the stock indexes, which were expected to rise, dropped and Societe Generale suffered even greater losses of 5 bln. Euro. The whole story hasn’t yet been told, but even now few believe that one person, 31-year-old trader Jerome Kerviel, is responsible for all the losses as the management of the bank insists.  During questioning he stated that the management should have been aware of his actions. His trades exceeded the limits. Moreover, as of the end of 2007, Kerviel had a profit of 1.4 bln. Euro. After announcement of these losses plus a 2 bln. loss in the American mortgage market, the bank declared additional financing in the amount of 5.5 bln. Euro. The markets have already digested this information. The shares of the second largest French bank started to rise due to rumors of the potential merger with its competitors.

The Dow Index dropped to 11, 670 points. In early 2000 the decrease started from this price range and six and a half years later it finally broke through and the rate in a year was 14,100 point higher. The FRB efforts were not in vain. The rate dropped by a thousand points and the danger of a large-scale fall was avoided. 
In the last days of January gold rose to almost 944 dollars per ounce. Now the price has dropped to less than 900 dollars per ounce.  Silver underwent a rapid growth to 17.3 dollars per ounce, but later the price dropped to 16.50 dollars per ounce.
Crude oil costs 89.4 dollars per barrel and this price has remained stable for a long time. Since last October crude oil has been traded in a wide range from 85.5 to 97.5 dollars per barrel.

In spite of such active decisions by the monetary authorities, there is no confidence that this will lead to stable and lengthy increases of stock indexes.  The year of 2008 is likely to be hard for the markets and the economic growth cannot be achieved through only rates reduction.