Crisis Is Not History, but optimism's Return Marks First Victory

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Monday, 11 May 2009

Optimism has returned to world economy. Of course this evolution doesn’t solve all the problems, but without a doubt is a big and very important step forward. The sensation that the worst of economic crisis is now back helped market’s psychology and this send stock indexes, oil prices and the Baltic Dry Index at higher levels. From the middle of the week we've seen positive numbers on jobs -- private sector jobs, jobless benefit claims and now smaller than expected job losses last month. At the same time, the results of US bank stress tests were widely seen as not as bad as expected, something that gave gains to U.S. and European stocks and send crude oil prices near the level of $60 per barrel the highest settlement since November 24. The gains were encouraged by stronger global equities markets but there we must underline the positive domino that characterised the markets worlds, as the equity markets were helped by energy shares that rose on the back of stronger crude prices. It is crucial that although we don’t have any actual improvement in demand yet, but clearly there is optimism right through the financial markets.
Several large U.S. banks announced equity and debt offerings to raise their capital levels after the stress test results were released late Thursday.
The results have "given people a little bit of confidence that the government can help to solve this part of the financial crisis," said Richard Sparks, senior equities analyst and options trader at Schaeffer's Investment Research in Cincinnati.
"There's a sense that the government actually has a logical plan, (that they) are holding the companies to a certain standard (so) even if things got worse, these companies will be able to survive. That helps bolster confidence in the administration."
After all, for the week, the Dow, Nasdaq, S&P 500 rose 4.4%, 1.2% and 5.9%, respectively and financials stocks spiked 23% on the week.
The surge in equity markets pushed major indexes further into positive territory for the year, with MSCI's all-country index, which is now up 6.4 percent so far in 2009.
Oil rose more than 3 percent to settle above $58 a barrel, close to a six-month high, after data showed U.S. employers cut 539,000 jobs in April -- below the March tally of 663,000 job losses and consensus expectations of 590,000.
All these are of course good news for the shipping sector, as the recovery of world economy will help international trade and of course shipping rates at a moment that finds shipping companies at the edge. Baltic Dry Index continues to strength and now lies at the level of 2.214. Although this level is considering too low to support the industry, it is 233.95% higher that the historical low levels of last December. At the same time leading analysts keep pointing out that the course of the BDI should be closely monitored as an indication of the world economy’s rebound.