Major Market Movers

07' Eco. Panorama

A trading year has passed us, as we stayed through the gains and losses, the hikes and cuts, growing and slowing economies, and more over we shared the anxiety and tranquility.

It was just one of those years with diversity in performance highlighting the major happenings and events that glided and swung us throughout the year.

The bullets fired this year were all across the globe, yet the nuclear explosion was on US grounds where its after-shocks hit THE WORLD… The blinds were uncovered and the bright light of truth rays blinded all, as the US housing slump spread into a catastrophic financial crisis as subprime loses mounted, massive write-down's to all mortgage backed securities hit financial institutions leading to a global sell-off.

Reappraisal of risk has taken investors by surprise as all were incapable of assessing their amounts of holdings correlated to the US housing sector. We saw new records set this year across the board and mainly they were US dollar lows; economies and world financial markets entered a new era of high voltage volatility that made futuristic dream figures just steps away, new levels were created along side a new GLOBAL ECONOMIC STORY…

Economies adjusted to the new scenario and were affected mainly by what was referred to as the "Credit Squeeze"; we saw Interbank Offered Rates soar as the lack of liquidity and faith among banks made them reluctant to lend each other, while currency fluctuation were very revealing to insecure sentiment as Carry Trades and their reversals making the Japanese Yen the gossip of the season.

The deterioration on US grounds empowered the Feds to indulge in a number of cuts on their Benchmark interest rates, followed by the Bank of England, and Canada as well; all were part of the ripple effect to the spread of the housing slump in the US and the world's financial system.

Attempts by world banks to provide liquidity exceeding lowering interest rates yet they created by conjoined efforts the Term Facility Auctions a move yet to prove its level of efficiency in calming tensed liquid thirst markets.

The dilemma was further complicated as economies started to witness signs of softness on their grounds, while new historical levels that were created in the markets agitated the situation. Record Oil prices near a three digit figure, Gold near all time high, and finally the 13 nation currency's appreciation to all time high and the complications it sprinkled to the vigilant ECB, while the extreme fluctuations for the Japanese Yen just further might weaken their economy.

As we said this year was just one of those to go on record, and still we fear 08 is to unbutton further surprises, we need to know where we're standing to be the pioneers and not fall again victims to poor risk assessment. Further materialization to losses might still be seen and the US economy needs to reflect signs of stability to exit the danger zone of recession!

All combined will affect the headings of the global economy this year, and to see ahead you must be aware of the dark past, and to that we present to you our 2007 Panorama where each major economy this year was highlighted in lines. Read thoroughly and analyze for we say to you the financial rollercoaster is about to go wild this year…

The United States

Now that 2007 had come to an end, let's go back in time to examine the major highlights of the year, as it's expected to see the outcomes of last year in the New Year, and the outlook doesn't seem pretty from where we are standing at the moment for the world's largest economy…

The U.S economy grew by 0.7 percent in the first quarter of 07, while the economy grew by an impressive 3.8% and 4.9% in the second and third quarters respectively, and is expected to drop to as low as 1.0% in the forth quarter of 07. Inflation rates entered the Fed's comfortable zone though the year making the job far easier for the Feds and giving them more cushion to focus more on downside risks to growth, yet the situation didn't persist as inflation started to hike again on increasing energy prices and impressive growth rates through out the 2nd and 3rd quarters.

The U.S Dollar depreciated against major currencies through out the year, dropping almost 12% against the Euro as the Euro was around $1.28 at the start of this year and ended trading around the $1.46 levels, while the Dollar dropped 8% against the Yen this year as investors reduced their Carry Trades heavily through 2007 in which they borrow in low yielding currencies such as the Yen and invest in higher yielding assets.

As for the U.S Futures Indexes' performance through out this year, the NASDAQ 100 was the most impressive one gaining 14.9%, the DJIA inclined 5.4% over the year, while the more diversified S&P 500 gained 2.6%. U.S Indices survived through out this year and the blue chips sector outperformed other sectors, while the energy sector also was one of the outperforming sectors in the economy.

Energy prices increased dramatically this year, edging up from as low as the $50 levels to its all time high at $99.26 in November, increasing energy prices contributed into hiking inflation rates in the last quarter of 2007, and other downside effects is seen on consumer spending as Americans now spend more off their pockets on gasoline rather than other products. Gold Prices on the other hand inclined heavily through out this year, from $650 per ounce back in January, edging up heavily to around the $840 per ounce gaining almost 20% through out 2007.

The Housing sector started to show its severe effects on the economy especially in the second half of 2007, subtracting as much as 1 percent from the third quarter's GDP estimate, and is seen to continue dragging the economy down through 2008.

The Manufacturing sector continued to show more weakness and even the depreciating Dollar which helped Exports couldn't make up for the slowing sector and the Services sector remained one of the few sectors that was still holding up.

The Trade deficit widened through 2007 on rising deficit with China and increasing energy prices, as the American Senates are still trying to push China into letting the Yuan float freely, the Average of Deficit through 2007 was 58.7 billion, edging as high as 62.7 billion in March and hitting as low as 56.9 billion in August, the Exports remained one of the main reasons contributing to substantial growth levels on the back of a depreciating dollar, but increasing concerns over the Chinese influence on the American economy is yet to have a solution. The Net Long TIC fluctuated heavily during 2007, the Feds use this indicator to cover up the trade deficit and the most noticeable thing about it was Net Sales through August by $150.7 billion and September's Net Sales of $32.8 billion.

The Labor market also was holding up thorough 2007, the Unemployment rate dropped to 4.4% thorough out the year and remained below 5.0% and those rates are considered historically low and healthy to prevent the economy undergoing recession, those healthy rates gave personal Income the momentum to remain strong and helped eliminating some of the negative effects of other underperforming sectors in the economy. Surprises were seen through out the year, but the biggest surprise was the 4000 decline which was reported in the Non-farm Payrolls back in August which at the time highlighted recession but a revision in September eased expectations of a recession in the world's largest economy though downside risks to growth and upside risks to inflation now threatens the economy with Stagflation.

The Feds announced in September their first cut on their benchmark interest rates, a 50 basis points cut took the rates from as high as 5.25% to 4.75% the Feds applied two more cuts taking the rates to as low as 4.25% and financial markets expect rates to decline by a further quarter basis point to 4.00% in their next January 30th meeting, along with that the Feds also applied a series of cuts to their Discount rates taking them from as hig