BetterTrades

February 27, 2009

Internationally, Japan’s Nikkei 225 posted a 1.5% gain on Friday as the country’s bank shares took a defensive position as news from America relating to an agreement with the government and Citigroup (C) is likely to be reached. The index, which closed at a 26-year low during the week, managed to end the week’s sessions up 2.1%, but down more than 5.3% for the months as Japan continues to face a severe credit crunch along with deepening economic woes.

Although the Nikkei is down more than 5% for the month, that accounts for some of the indices’ 14.6% loss thus far this year. Japan’s markets lost more than 42% of its value in 2008, its worst postwar performance on record. In company news, the president of Sony Corp., Ryoji Chubachi, announced that he was stepping down after warning investors that the company was preparing to post a record yearly loss.

Economically, Japan released information today stating that factories throughout the country saw production drop a record 10% in January, solidifying the distress of the recession. Analysts are now forecasting that factory output in Japan could post a greater loss than today’s reading.

"The downturn led by manufacturers may ease after the first half of this year," said Takeshi Minami, chief economist at Norinchukin Research Institute. "But it will gradually spread to non-manufacturers, making Japan's economic gloom a long one."

Furthermore, unemployment data in Japan revealed that job offers in the country dropped 18.4% from this time last year, as the ratio of jobs per applicant came out to two jobs for every three people applying.

In currency trade, the yen advanced marginally against the U.S. Dollar today, as the greenback slipped from 98.38 yesterday to 97.80 today. Falling nearly 12% from the currency’s 13-year peak against the Dollar of 87.10 last month, the Japanese yen was once a safe haven for investors from the devastating effects of the global financial crisis.

Elsewhere, London’s FTSE 100 index posted a 2.2% loss by the close on Friday, as European stocks dragged the markets lower on concerns of upcoming earnings and a huge loss already posted at Lloyds Banking Group.

The FTSE has traded down more than 10% in February alone, which follows 2008’s decline of more than 45% and a 14% decline since the start of 2009. With many of the world’s markets placing blame on the U.S. subprime mortgage collapse, England’s markets have taken massive losses as a result, which in turn, has pushed some of the country’s banks to the brink of extinction.

Despite the fall in pharmaceutical stocks during today’s session, which saw shares of AstraZeneca drop 6.3% and Sanofi-Aventis fall 5%, UK banks shares also declined in trading. One of the country’s largest banks, Lloyds, announced Friday that the bank took a loss of 10 billion pound for 2008, thus pushing its shares lower by more than 21% by the close of trade today.

In Eastern Europe, the European Bank of Reconstruction and Development (EBRD) confirmed Friday that struggling banks throughout the region will receive some 24.5 billion Euros, or $31.1B, in aid to help the financial institutions patch-up their balance sheets. "We are acting because we have a special responsibility for the region and because it makes economic sense," announced EBRD President Thomas Mirow.

In a report on Thursday, UBS named former Credit Suisse CEO Oswald Gruebel as the bank’s CEO as shares of UBS have fallen more than 85% in 18 months and is in need of a massive restructuring program. Gruebel, which lead the restructuring at Credit Suisse from 2003 to 2007, comes in the midst of the bank cutting some 2,000-investment jobs in order to revamp the company’s profitability.

In other Forex trading, the 16-nation currency slipped in value against the Dollar, as the Euro fell to $1.2683, down from last night’s price of $1.2749 as the European Union announced that inflation dropped to a 10-year low in January, which could then lead the European Central Bank (ECB) to cut interest rates next week.

Eurostat, the European Union’s office for statistics, provided data that showed that inflation throughout the Eurozone slipped to 1.1% in January, its lowest reading since the middle of 1999. Friday’s reports also comes in lower than the 1.6% consumer price inflation reading in December, and well below last year’s inflation reading throughout the zone when it stood at 4%.

Additionally, the British pound retreated against the greenback as well on Friday, buying $1.4297, down from Thursday’s price of $1.4310. Against the Canadian dollar, the greenback bought 1.2716, up from last night’s price of 1.2490, while advancing against the Swiss franc as well, buying 1.1694, up from 1.1650.

2009 Better Trades Article

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BRIAN MULLIN