European Shares Opened Lower for Third Time in a Row

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Includes: ADRA, ADRU, GLD, IEV, OIL, USO, VEA
by: The LFB

European Trade: European shares opened lower, once again, for the third day in a row. However, yesterday’s markets found the strength to close in the green.

Looking at today’s activity, the biggest losses have been carmakers and airline companies, as crude oil has been resilient recently and is now hovering near the $116 a barrel level. Furthermore, investors speculate that bank losses related to the credit crunch might widen, topping above the $500 billion benchmark. Previously, the IMF had estimated losses would reach $1 trillion. The German Dax has declined 31.36 points (0.50%) to 6,265.59. The U.K. FTSE has declined 113.80 points (2.07%) to 5,391.80.

Asian shares were dragged off of their lows as the closing bell approached by earning reports released by some major Asian companies. The Nikkei declined 25.75 points (0.20%) to 12,752.96 after another important real estate company from Japan filed for bankruptcy. The Australian S&P/Asx rose 3.70 points (0.07%) to 5,011.20, barely closing above the neutral line.

Gold rose due to the fact that traders are looking for an alternative investment. Bullion for immediate delivery advanced $4.90 (0.59%) to $833.00.

Crude oil traded sideways as the dollar declined and a tropical storm/hurricane is heading toward the Gulf of Mexico. Crude oil for September delivery gained $0.33 (0.28%) to $116.60.

Previous Asian trade: Asian shares are extending the losses from the last few weeks of trading. Fears that the credit crunch already spilled over the real economy, eroding profits and affecting the macro-economy over the long term, are eroding investors’ confidence in the market. It looks like the same things are also in the inter-bank market, where the spread is at a record high. The cost of protecting assets from default is still way above the last year’s average, while the cost of additional capital in the money markets is at the highest point in comparison to last year. It is very likely the number of bankruptcies will rise exponentially in the coming months, especially if conditions do not improve substantially.

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