The Trading Floor

[Arctec]

Has the mighty Greenspan failed to talk up the markets?

US Federal Bank Chairman Alan Greenspan’s monitory policy report and economic review on Tuesday and Wednesday did manage to spark patriotic support for the greenback and US equity markets over the last two days. By Thursday though, investors had time to digest what was said and what was not. In essence, Mr. Greenspan reiterated only what he had said in the past, that of “measured” monitory tightening being the way forward in the upcoming months ahead.

On this revelation, US equity markets gave up all gains, and then some, made over the previous two euphoric days. The NASDAQ posted its biggest loss since March 15 on Tuesday as the reality off poor earnings continue to plague the markets, confirming the longer downward trend. The rest of the world’s equity markets pretty much followed the same boom bust pattern.

With the second quarter earnings season slowly drawing too a close, fragile and bruised investors are bound to take a breather. Expect some consolidation in the equity markets with slight downward baize.

Currency markets as with the equity markets had a bumpy ride. The dollar made good headway during the Greenspan speech days, regaining a lot of lost ground against most major currencies. Fundamentally however, not much has changed except for the index of leading indicators and a closely watched gauge of future US economic activity compiled by the Conference Board, which fell further in June. There does seem to be some dollar support at the moment, but once again, some consolidation could be on the cards.

As far as the commodities markets go, it is less of a clear cut picture. Gold, silver and other commodities were hard hit by Greenspan’s upbeat commentary, with gold falling well below the psychological $400 level, but unable to recoup losses by week’s end as the dollar weakened and the equity markets came off. Support levels are being tested at present and this could spell buying opportunity.

South African markets

A double whammy hit the South African markets as a stronger rand and weaker commodities played havoc on the local bourses for most of the week. The rand turned at R5.87 at which time some long exposures became very attractive as R5.80 was sighted as a major resistance level. With the rand at R6.20 at the moment those hammer due listed and resource shares sighted last week are now looking not so hammered any more.