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Tuesday, November 18, 2008

BetOnMarkets Afternoon Report

US stock markets are pushing higher and holding ground above crucial support levels. The S&P 500 has far managed to find a floor above the 850 handle and the Dow Jones has found some breathing space above 8000. It is hardly grounds for popping the champagne corks, but at least US equities are holding for now. Stock markets seem to like the biggest ever month on month drop in the US producer price index. The drop was 2.8% which exceeds the previous extreme of -1.6%. With inflation also dropping in the UK, markets are hoping that there is now more wriggle room for further rate cuts. What is most amazing about the current crisis is the speed at which things are moving. Just three months ago, the FTSE was 36% higher with the bank of England hesitant to cut rates because of the dangers of rising inflation. Fast forward to the present day and it’s a very different picture. There is simply no telling what the market or economy might be like as we start 2009. A sell off of this speed hasn’t been seen since the 1930s and although this comparison has often been made of late, it is worth noting that at the low points of this period, rallies, when they came were surprisingly aggressive. With a flood of cash waiting in the wings, there is always the possibility of this happening again. Finding the low point might be the problem.