Equity Markets Lower Ahead Of CPI Data

Current Futures: Dow -115.00, S&P -12.90, NASDAQ -18.7
 
European Trade: Global equity markets continue to trade below the break-even line, despite the positive close on Wall Street on Tuesday. The overnight equity markets are trading in the red, while the U.S. Futures are trading well into negative territory, indicating a much weaker opening.

Declines have been seen in the financial sector, as it seems the government/central bank’s interventions have not had a strong effect. Commodity-stocks also declined on concerns about demand, since the world is approaching a possible recession. European shares posted strong declines since the start of trading. Currently, the Ftse is down by 73.85 points (1.75%), while the Dax has fallen 37.74 points (0.82%).

U.S. futures are currently running deep into the red, with the Dow down by 115 points, while the S&P future contracts have already fallen by 12.90 points. In the Asian session, the Nikkei fell 55.19 points (0.66%) to 8,273.22. In Australia, the S&P/Asx fell 23.60 points (0.67%) to 3,499.60.

During today’s U.S. session an economic report is expected to show that the inflation gauge, CPI, dropped the most since 1949 in October from one month earlier. Usually, such declines correspond to a strong contraction in the money supply, showing the Fed’s auction to boost demand (and spending) thorough lower Fed Funds had a limited effect. However, a big part of the decline can also be accounted to energy prices, which have recorded some strong declines in the second half of this year.

Previous Asian trade: Despite the positive close down the Wall Street, Asian shares and U.S. futures are both currently down, posting significant declines.

Investor confidence is being affected by Mr. Paulson’s testimony in front of the House Financial Services Committee, refusing a $25 billion loan to the U.S. car manufacturers from the pool of $350 billion available money. GM is headed with giant steps towards bankruptcy, even before the year-end, while the other two major producers, Ford and Chrysler are in similar positions. It is said that the bankruptcy of the three major players would shed about 3 million jobs in the U.S., while the government will lose more than $150 billion in taxes. Estimates are that the jobless rate would reach 8% from the current 6.5%, while the GDP will drop by 1% in nominal terms in case the U.S. car industry is left to die.