by Zangetsu77 12:15am 7 Aug
I thought the Dow rallied along with the EUR because of some positive newsflow from Europe, some commitment/reaffirmation from ECB to start bond purchases and some stuffs Sarkozy et al said after their teleconference.
Subsequently, it pared gains because the rumours of the S&P downgrade got onto the street. At around 2pm US tie S&P was meeting the US Treasury to talk about the downgrade, and the Treasury pointed out the $2 trillion error in S&P calculations, then S&P went back to cook up some reason to downgrade. During the process, word got out already.
by Novis 12:49am 7 Aug
Maybe just shortcovering ..I also dun know..: now macham latest news Germans are baulking at bailing out Italy leh... interesting wild rides again next week for euro and usd and equities i guess.
saudi mkt first to plunge following us downgrade....
http://www.telegraph.co.uk/finance/f...downgrade.html
Loupan 01:19am 7 Aug
- Regarding stocks, about 70% of the street/market is already positioned for a downgrade.
- Regarding stocks, about 40% of the street/market is positioned for a downgrade to AA.
- Actual downgrade is not to AA, but to AA+.
- The net effect of the downgrade being less than what was expected by some and surprise to about 30% of market participants.
Further...
- At the first glance, it would seem that the U.S. treasury bonds, now with a lower rating, should fall. But in reality, the opposite is a possibility. The reason is that a downgrade will provide more momentum to fiscal austerity in Washington. Fiscal austerity in the short-term means a slower economy. Slower economy means higher bonds.
- There has been a big concern about a large amount of treasuries held by big U.S. banks. The Federal Reserve Bank has just come out with a statement that it will tell member banks there is no change in the risk weighting of the U.S. treasuries. In essence, this statement means that the Federal Reserve is spanking S&P.
- It is hard to imagine France with a rating higher than the U.S.
- It is hard to imagine the European Central Bank with a rating higher than the Federal Reserve.
- This downgrade is likely to start of a race to the bottom, i.e., we may see a number of downgrades on an international basis.
- Since Moody’s and Fitch have reaffirmed AAA rating of the U.S., in material terms, this downgrade will have no effect on institutions required to hold AAA paper. By law, institutions are allowed to use the highest available rating.
No comments:
Post a Comment