Analysis

	World Financial Market Summary of June 26th, 2008

 
As expected, the US Federal Reserve System did not change the rate, and nothing was unexpected in the accompanying statement. Market participants are anxious about the future, which is evidenced by the growth of gold and crude oil prices.
In spite of the fact that immediately after the decision on the rates the main world stock indexes went up, futures continued to go down and are now being traded around the critical support levels. Thus, for instance, futures for the American Dow Index went below 11,700 points and futures for the German DAX – below 6,600 points.
Pre-requisites for development of a bear market are obvious. The economic statistics cannot yet provide a definite answer to the question of what is happening to the American economy.
  Attempts to resist the growing oil prices with administrative measures, i.e. by forbidding the so-called speculators (pension and hedging funds) to participate in trading, are not likely to change the current situation. Irresponsible policies and economic manipulations – these are the measures used to prevent a recession. As a result, inflation will continue to conquer the world and trust in modern financial institutions will be completely lost.
 The export of economic problems from the USA returns to the major world economy as a boomerang. The GDP growth, which so far corresponds to the estimated value (+1%), does not bring much optimism, for its likely to be eaten up by inflation.
 The housing market, where a drop in sales is accompanied by price reductions, is in stagnation. Just recently it was a driver for American and other economies.
   Today futures for Brent crude oil went up to 138.50 dollars per barrel and for gold – up to 914 dollars per troy ounce. The crude oil rate around 150 dollars per barrel is likely to be reached in the near future. This level will be definitely overcome by the fall. A statement by Saudi Arabia on increase of oil production is not likely to significantly change the situation. Even if oil production increases, this will result in accelerated depletion of resources. Moreover, an increase in production will require additional investments, which will certainly affect oil self-cost.
    It seems that financial authorities all over the world are waiting till the situation resolves itself as the measures taken are definitely not enough for resolving the existing problems. And few will dare to start painful reforms affecting the interests of supernational corporations.