[tanstaafl]

Financial Sec rally last week. was the worst over ?

[挺傻]

Market Comments

End of July, time to have more focus on the market. Sell in May and go away applied well this year. Year of election, year of olympics, year of many environmental changes. Stay tuned, let's see what will happen in the later half of the year.

The financial sector seems to have made it through another squeaker.

Canadian money market and bond yields were virtually unchanged by the end of the week, after lots of excitement in the interim. The big action seemed – as often the case these days – to be south of the border, and for once it was constructive.
Shares of Fannie Mae and Freddie Mac, the US government sponsored enterprises that own or guarantee almost half of the $ 12 Trillion US home loans outstanding, moved higher on the Treasury Department’s rescue plan. That lifted the financial sector, including my favourite bank stock, which has gone up almost 20% from two weeks ago low point.
Citi Group reported a smaller-than-expected $ 2.5 BN loss for Q2, pushing credit spreads lower despite a worse-than-expected $ 4.65 BN loss reported by Merrill Lynch yesterday.
Bank of Canada Governor Carney was in the press this morning suggesting that higher bank funding costs are the new normal, and that banks are beginning to adapt to that.
Nervous investors who had bought safe government bonds began to poke their heads out, and US bond yields moved higher, with 5s up 14 bps to 3.42%, on relief that the worst credit crunch fears weren’t realized.
The S & P 500 index is heading to close the week up 21 points – to about where it was two weeks ago.
The CDX index (of 125 investment grade US borrowers) edged lower for a second week, to 141 bps. Credit markets closed the week on a sunny note after the Citi results.
With the Fed likely on hold for the time being, short term US rates remained steady, with 3 month LIBORat 2.79%. Implied volatility in US interest rate options dropped near a two-month low as expectations increased that the Fed will keep borrowing costs steady.
Minneapolis Fed president Gary Stern said in an interview that the US central bankshouldn’t wait for financial and housing markets to stabilize before raising interest rates. Once things turn around, it is clear that the Fed could take back its previous easing fairly quickly.
According to Bloomberg, the consensus forecast is for the Fed to hike short term US rates by 125 bps in 2009.
Is the bull run in commodities over?
The TSX is looking likely to close down 194 points, with commodities indices down almost 10% from a record two weeks ago, on concern that slowing global growth will erode demand for energy, grains and metals.
Crude oil is down $ 16 to $ 128 a barrel – after all the concern and speculation over Iran, the Bush administration decided to send a senior official to participate in international talks with Iran this weekend, and Iran’s foreign minister said that his country was open to discussing the establishment of a US diplomatic presence in Tehran for the first time since US embassy there was occupied and its diplomats were taken hostage nearly three decades ago.
That’s the type of diplomaticsignaling that can mark an important turning point in a relationship which has not been on a good course recently. A friend of mine in the foreign service once told me that diplomats are "honest people sent to lie for their country". Let us wish them well – there are hardliners on all sides who possibly do not.

[sip]

Why XIU is down sharply today?

[lostinblue]

Because financial is in red again.

[newer]

How about V(Visa)? Is it a good buy when V is below $70? Any comments? Visa is getting more and more popular in China too. Master card had a huge run before.