A sense of lethargy permeates the stock, forex and oil markets Wednesday, each specific market dazed by different factors.
Stock investors are reluctant to bring the Dow (^DJI: 11520.02 +3.10 +0.03%) higher despite falling oil prices. It just so happens that another hedge fund has closed shop in the US. Ospraie Management LLC announced late Tuesday that it is pulling the shutters on Ospraie Fund Ltd. after it plunged by 26.7% in August. In the year-to-date, the Fund is down 38.56%. It is one of the biggest players concentrating on the commodities market, and unsurprisingly, its humongous losses came from energy, mining and natural resources stocks. The weird thing is that an unnamed someone said that Ospraie was supposedly short on these commodities, but these commodities having been heading south. So they should have turned in a windfall profit instead of a loss? And a big loss at that.
What also makes this a water-cooler talk is that Lehman Brothers (LEH: 16.50 +0.37 +2.29%) holds a 20% stake in the hedge fund since 2005. Since Lehman has got so many problems under its own roof (especially now that it’s scrambling to find new capital inflows), maybe one more problem won’t make much of a dent.
Ospraie Fund’s demise will not be the last we hear about this year as more hedge funds, even those that manage more than $1 billion, cross over into the negative territory.
The forex markets are more exciting today: Earlier in the Asian and European session, the US dollar piggybacked on its ongoing bullish sentiment and continued to make another high against the Euro, Swiss franc, British pound, Aussie, Kiwi and the Canadian dollar, but it later retreated to close lower on profit-taking actions.
No point getting in the way when both the Bank of England and the European Central Bank are scheduled to announce interest rates Thursday. The ECB is likely to hold its main refinancing rate at a seven-year high of 4.25% and the BOE most likely will keep the target lending rate unchanged at 5%.
The Eurozone isn’t doing well at all: Wednesday’s data showed that Eurozone retail sales fell 0.4% last month, more than the 0.2% decline most had expected. The first estimate for the second quarter GDP came in at -0.2% quarter-on-quarter, in line with the preliminary estimate. So while the US managed to grow by 0.8% for the same period, Eurozone economy actually contracted officially - the first such since records started in 1995.
Meanwhile, crude oil prices remain under $110 a barrel, despite geopolitical tensions between Europe and Russia over the latter’s conflict with Georgia and the threat of lowered supplies from Russian-controlled pipelines to Europe.
It will be a fun day when Thursday comes. Lower your trading anxiety by taking quick profits.
Economic Calendar For Thursday:
Australia trade balance 0130 GMT
Bank of England rate decision 1100 GMT
ECB rate decision 1145 GMT
ECB’s Trichet speaks 1230 GMT
US ADP employment 1215 GMT
US initial jobless claims 1230 GMT
US ISM non-manufacturing composite 1400 GMT
Fed’s Fisher speaks in Houston on economic challenges 1740 GMT
Fed’s Yellen speaks on US economy 1800 GMT