It's the time to put up for sale..

Economists and Investors are anticipating that Fed Reserve will reduce the interest rates in next meeting. It will affect the bond market drastically.

Now Investors are selling off Floating rate notes, whose Interest payments depend on the central bank policy and they are fascinating towards the fixed interest rate bonds.

Floating rate notes will give better average returns than fixed rate bonds. But lower interest rates in the market are pushing the investors towards the fixed rate bonds. They are all buying fixed rate bonds, something they can get capital when the yields go down.

If Fed Reserve reduces the interest rates, Floaters must be ready to bear the losses. Floaters who are enjoying the high average yields from long back need to sell their bonds before it leaves you with losses.

European Markets Rebounds..

Declined oil prices made the European markets to gain 4 months high. Crude oil fell $60.55 barrel from a record high of $78.40 on July 14. It encouraged the takeovers between the companies in Europe.

In the U.S, Europe's biggest export market, the Federal Reserve unchanged the interest rates may boost the exports of Europe. But a report on Slowing Economic growth in Europe affected the US Export companies.

Higher Interest rates in Europe spurred the Investors to invest in stocks that may be least vulnerable to an economic slowdown.

Overall, fall in oil prices, exports and interest rates made the European markets to rebound the stocks. All these causes made the Euro stronger against Dollar. It seems European markets are becoming powerful than the US markets.

Bullish Bullion

The bullion market is holding back its sales after the major decline in this month. Asian countries are buying the gold heavily as the drop in the gold prices this month. The bullion's drop is attracting jewelers looking to build stocks before next month's Indian wedding season and the year- end holidays.

India, Thailand, Indonesia, the whole region has been buying heavily in spite of the 8 percent drop in the precious metals.

It seems increase in sales obviously stimulate the proposals of mergers between the gold producing companies like Gold fields and Barrick Gold. These signs may reinforce the strategic move and gives lots of synergies and benefits.

Its probably good news for the Central Bank Gold Agreement (CBGA), which has been looking for the sales boost to reach target by the year end. The CBGA has to sell the 160 tonnes more to achieve the overall target of 500 tonnes.

Slump in Housing Market

Housing market boom is slowing quicker than it was expected earlier in spite of the reports that Federal Reserve may increase the interest rates. US Dollar is becoming weaker against the Euro and the Yen as a result of the down trend in Housing market. Hence, Investors are attracted towards the Lower Interest rates in Japan to buy assets.

In the wake of the 2001 recession, Federal Reserve reduced the interest rates to revive the economy. Stocks, Internet and housing market boom has replaced with that decision. Housing market became the heart of the economy after the recession period.

It’s the time to rethink about the interest rates to boost up the Housing market. But Housing Slowdown is significant to slowing economic growth and as well as to moderate the inflation rate.

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Fifth anniversary of the 9/11

US began ceremonies marking the fifth anniversary of the September 11 terror attacks. It again puts the spotlight on who lost their loved ones in the attack.

It took five years to recover from the economical adversity and still fighting against the terrorism in the world.

The US government has blacklisted one of Iran’s biggest banks, Saderat bank with approximately 3,400 branch offices, was used by the government of Iran to transfer money to terrorist organizations.

The bank had facilitated the transfer of hundreds of millions of dollars to the Lebanese militant group, Hezbollah, and other terrorist organisations, every year.

This may not impede the attacks and terrorism from the gross root level but it definitely assures the peace.

Down trend in markets...

US stocks declined due to housing slump. All the markets were on the pace to decline. Investors are worried about an economy that is slowing more than expected.

All the major housing company shares fell below the expectations and there may drop in the home prices. The earnings cuts by KB Home and Beazer were followed by a report from the National Association of Realtors today that said home prices may drop as buyers gain negotiating power.

It seems Fed may raise interest rates from the perspective of inflation and economic growth.

Federal Reserve role in US Economy

The attacks on the World Trade Center five years ago were aimed at the financial centre of the world economy. Many of the world's most important financial markets were located in or near the World Trade Centre. All the markets got huge losses from this disaster. The cost to the economy as a whole appeared to be much higher. Business and consumer confidence fell sharply.

Within a year the US economy was on the path to recovery. Fed Reserve and US central bank responded to disaster quickly, it ensured there was no financial disruption and it cleared the problems in financial functioning.

As soon as financial markets reopened, the Fed cut interest rates by half a percentage point. Before the end of 2001 two further cuts of a similar magnitude followed. Yet more cuts took rates down to a 50-year low of 1% by 2003. Fed reserve also launched housing boom.
It played a vital role in taking economy in the right path.

US Employee - A cog in the machine

The US economy has been generating strong economic growth over the past few years as it has come out of recession. But the little growth which was seen has been shifted into the hands of the average worker, according to new a research from the Economic Policy Institute.

The US has been expanding its economy and productivity from the last five years without considering the factors like hike in wages and unemployment problems. Median family’s average income growth is stagnant in US even if there is high productivity.

The immigration problem may have had a greater effect on the wages of low-skilled workers. US manufacturers reducing their workforce to compete with china’s low priced products has undoubtedly added to the ever increasing unemployment problem.

US must be ready to face the unemployment problem if it ignores the employee growth.

All about Yen..

A report showed Japanese companies have increased spending and investment. This spending report made the yen stronger against the dollar and the Euro. Lower rates in Japan have encouraged Japanese investors to send money overseas in search of higher returns.

Even yuan indirectly made the yen stronger against other currencies. A stronger yuan made China's goods more expensive for overseas consumers and increased its buying power for Japanese goods, helping the yen.

In a survey Fifty-seven percent of 49 traders, strategists and investors advised to sell the dollar against the euro. Forty-three percent of those surveyed said to sell the U.S. currency versus the yen. It seems dollar is becoming weak day by day.

I think yen may hamper the path of world currencies and the dollar has to face adverse condition in the coming days.

Fresh air into the US markets

U.S stock index futures reached a high note. Standard & Poor's 500 Index futures, Dow Jones Industrial Average futures, and Nasdaq-100 Index futures also climbed.

Few reports strengthened the belief that the economic growth is possible with the expansion of manufacturing and jobs. The market manufacturing sector continued with the upward trend and the unemployment came down. Automobile Companies sales have increased due to new projects.

I think it’s the right moment to recover the consumer confidence level. Even Fed reserve will get some relief from this news. The Fed may seem to run on the right path without increasing the interest rates in the future.

European Market in the Hands of ECB?

The Europe’s inflation slowed down to 2.3 percent from 2.4 percent. The European Central Bank raised its forecast for inflation to 2.4 percent for the next year. The ECB is sending signals to the market that the hike in interest rates is quite likely.

The ECB may increase the interest rates to cool the inflation. ECB fears that the impact of inflation may also affect the oil prices in 2007.

I feel that the current economic conditions in the US may slow the European imports and the ECB’s policies will be crucial in the coming years.