Gloom covered the the US financial markets Friday: Oil shot up to a new high of $142.26 in the New York trading session due to an apparent short squeeze in the futures markets. There hasn’t been any “latest” scare news, just that Nigeria and Venezuela are due to meet soon to discuss high oil prices. Already, the idea of $200 oil is floating in the air as people talk about that number in the media.
In the currency markets, the US dollar continued its downward move against the Euro, Swiss franc, British pound and yen, but these major currency pairs have been trading in a narrow range and are likely to do so towards the end of the trading week. US stocks are looking quite battered, with the Dow Jones recently down by more than 120 points.
US consumer confidence data for June from the University of Michigan are a bit weaker than expected, with the headline confidence index at 56.4 (56.5 expected) compared to a mid-month reading of 54.7. May’s reading was higher at 59.8, so consumers’ mood had worsened since last month, dipping to a 28-year low. Wondering what the consumer sentiment registered just last June, before the credit market crisis? It was a high of 85.3, slightly lower than the peak of 96.9 reached in January last year.
Fed’s Rescue Of Bear
According to today’s release of minutes from the two meetings in mid-March, the decision by the Fed to take the never-before step of helping 85-year-old financial firm Bear Stearns avoid a collapse by facilitating its sale to JPMorgan Chase (JPM) was discussed and voted on by four Fed officials. The minutes said that the “funding difficulties” of Bear Stearns and the “likely effects of its bankruptcy on financial markets” were discussed.
“The Board’s decision to establish a facility for primary securities dealers was based on recent, rapidly changing developments,” the minutes read, noting that the credit markets were so tight that “dealers might have difficulty obtaining necessary financing for their operations from alternative sources.”
A few more financial firms aren’t doing that well either and are finding it difficult to raise more capital. Was this the first and last one, or will there be more intervention by the Fed with American taxpayers’ money?
EUR/USD is only slightly higher today, hitting a high of 1.5785. Euro bulls are not out in force to bid the Euro higher as much of ECB’s rate hike next week has been factored in. USD/CHF has had a bigger fall, dropping to an intraday low of 1.0165, reaching previously mentioned bear targets of 1.0200 and 1.0170.