Futures rise, combined with gains in Asia, signal a upward shift for the Dow at the start of the week. With the effects of the auto bailout settling in after last Friday’s rocky session, news that China and Denmark are taking action to add liquidity to the system should contribute to propel the market up, offsetting reports of production cutbacks in tech industries, Toyota’s first-ever losses and the continuing shock waves of the Madoff scandal.
As a plethora of analysts starts to forecast a stocks recovery in 2009 in spite of the continuing grim economic data, the extra liquidity is expected to begin trickling back into the market, with investors slowly reversing the selling trends.
Expect a slight rise at the end of a volatile session.
A stronger than expected auto bailout plan, announced before the opening bell, provided a potent boost to the market on early trading, propelling the Dow into the green for most of the session.
However, hopes that Congress will release the rest of the TARP money before the end of the Bush presidency and Japanese strong action to inject liquidity in the market at the end proved insufficient to keep the Dow from closing down once again.
Despite decisive action from governments, the market is still on distrust mode, with investors not taking any chances and cashing in on early gains.
Trends are set for another day of market losses. With the effects of the Fed’s intervention wearing off and investors beginning to wonder what’s left on Bernake’s arsenal, news of a fresh $850bn stimulus plan will be insufficient to offset the negative clouds hovering over Wall Street.
Adding to the negative mood are news of automakers cutting back on production, SEC’s admission that it failed to act on Madoff’s case despite warnings, losses in Europe and new unemployment figures that, although showing a slowdown on new claims, still register the worst month since 1982.
Expect moderate losses at the end of a roller coaster trading.
The EU approved an action plan on climate change that sets ambitious goals for the bloc. The EU now vows to cut CO2 emissions and energy consumption by 20% and achieve a renewable energies ratio of 20%, all by 2020. However, concessions made to secure approval of the deal, especially to Germany and Eastern European countries, put the stated objectives at risk.
Climate change trends are mixed in the Near Future. The way is open for concerted EU and American leadership on next year’s climate change conference in Copenhagen, but overly generous emissions caps for industries in the EU’s plan threaten to derail the fledgeling carbon market.
Financial trends seem brighter in the Near Future. After the Senate rejection of the $14 billion bailout plan, the White House is now considering allowing the automakers to share some of the $700 billion earmarked for the banking system. In Europe, and after initial strong resistance from Germany, the EU approved a package of €200 billion to stimulate the economy.
The converging effects of this two plans should build some confidence in the market, prompting gains across all main indexes on Monday.
Trends on Climate Change seem to be improving. The US is set to join the global effort to cut carbon emissions, with Sen. Kerry saying that the US will be willing to lead if other countries commit to emission cuts. The auto industry troubles open a window of opportunity for the government to push for the adoption of a green business model in exchange for aid.
The Obama administration will commit to concrete emission cuts in the Near Future, taking advantage of the crisis to promote a medium and long-term transition to a green economy.
Global economic trends continue gloomy, with ongoing problems compounded by the Senate rejection of the $14 billion bailout for the auto industry. The bill’s collapse sent shock waves through the global market, prompting losses across all the main indexes. However, given the weight of the auto industry in the economy, it is unlikely that the US government will allow for the bankruptcy of one or more of the Big Three.
Assessment: Some deal will be hammered out in the Near Future that will prevent the loss of the 3 million jobs that the auto industry sustains.