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| Action Insight Weekly Report | Markets Snapshot |
Could EU's Emergency Funding Mechanism Stabilize Markets?It was a crazily volatile week and markets were clearly in risk averse mode. The -998 intraday fall in DOW might be exaggerated by "fat finger" or "computerized trading". But it's undeniable that the -628 pts fall in DOW was significant. Investors were in deep worry of contagion from the Greek fiscal crisis. It reached a point where something sensational was needed from authorities to restore confidence. ECB was supposed to do so last week but failed when policy makers didn't even did what the markets wanted, that was discussing about government bond purchases and selloff in risk assets intensified from there. We're talking about -5.7% fall in DOW, -6.4% fall in S&P 500, -6.2% fall in Nikkei, -5.9% fall in CRB commodities index and 12.8% fall in crude oil. Yen crosses are broadly lower with EUR/JPY down -6.82%, AUD/JPY down -6.58%, GBP/JPY down -5.72%, CHF/JPY down -5.35% and CAD/JPY down -5.10%. Meanwhile dollar index managed to accelerate recent rally and breached 85 level before closing at 84.47. |    |
| Featured Technical Report | |
GBP/USD Weekly OutlookGBP/USD dropped to as low as 1.4475 and recovered after hitting 61.8% projection of 1.6456 to 1.4783 from 1.5521 at 1.4487. Further recovery cannot be ruled out initially this week but after all, upside is expected to be limited by 1.4936 cluster resistance (50% retracement of 1.5389 to 1.4475 to 1.4932) and bring fall resumption. Below 1.4646 minor support will flip intraday bias back to the downside. Further break of 1.4475 will target 100% projection at 1.3848 next.
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| Special Reports | |
A Hung Parliament in UK - A Drag on Pound as Long as Uncertainty RemainsThe UK general election resulted in the first hung parliament since 1974. Although the Conservative Party got the most votes and won the most seats, it was 20 seats short of a majority in Parliament. The Conservatives are now seeking to reach an agreement with the Lib Dems so as to form a coalition government. However, it's difficult for them to reach an agreement given the great difference in social and European perspectives of the 2 parties. If the Tories fail, the Labours will forge an alliance with the Lib Dems. The problem here is that even if they reach an agreement, they still need supports from other parties to make up a majority. Therefore, political experts believe the most likely outcome is a Conservative-led minority government. The UK had a minority government in 1974 but it only survived for a few months before a new election was called upon. The uncertainties brought by this election resulted in slump in sterling, gilts and stocks. While we believe the market may have overestimated the negative impacts of a hung parliament, uncertainties should leave these financial instruments vulnerable for some more time. |
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The Week in Review and Preview |
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