December 1st 2010
There are conflicting fundamental forces at work on global financial markets; all of which seem equally dominant, resulting in short sharp price shifts up and down, but ultimately going nowhere…
Healthy corporate earnings and low interest rates are underpinning equity markets, while fears over double dip and eurozone solvency are capping any upmoves.
Bond speculators are contra-trading central government intervention of bond buying, providing virtual equal and opposite market forces. History suggests that single central government intervention often fails, with speculators coming out on top; however coordinated multi government intervention is likely to prevail.
Commodities still have underlying strength, although recent volatility has given some bears reason to expect that we are near the top of the market.
The currency markets are dominated by Euro speculation and currency battles. Recent failures at the G20 summit to find an amicable solution to all nations trying to weaken their own currency to aid exports, has only meant that the battle will continue, with US intervention to effectively weaken the UD dollar is likely to outweigh its counterparts.
The Eurozone woes have come back to the front page news and it seems we are already being prepared for bailouts of Portugal, Spain and Italy. I think what is surpising to many, is the relative strength of the Euro given the instability of the eurozone. Then again when Bear Stearns collapse in early 2008 went relatively unoticed by the markets, until the faulure of Lehman Brothers later that year…