Morning Call by Traders University

Yesterday the FTSE closed down 122 points at 4,345 after heavy falls during the whole day. In the US the Dow Jones fell 129.91, or 1.5 percent, to 8,292.13. In earlier trading it fell as much as 201 points recovering a little as the trading day closed. The Stock markets are jittery particularly after the S&P downgrading of the UK economy as indicated by the VIX Index (a measure of stock market volatility and “fear” in the market) which jumped up 8%. Yesterday, Sterling dropped from a 6-1/2-month high against the dollar after the ratings agency revised its outlook on Britain to negative from stable, saying the country’s debt burden would rise significantly. This reminded markets that the global economy still faces challenging times despite recent signs that the worst of the crisis may be past. That sentiment boosted safe-haven demand for the dollar and weighed on riskier assets such as equities and commodities. GBPUSD did recover the upside during the American session, consolidating near day’s highs. UK retail sales rose for a second month in April by more than economists forecast, evidence that the recession’s grip on the economy may be loosening. Sales climbed 0.9 percent from March, according to the Office for National Statistics with economists predicting a 0.5 percent increase. Sales rose 2.6 percent from a year earlier. US Unemployment Claims came in slightly higher than expected at 631K (expected at 630K). Overnight we had news from the Bank of Japan, which raised its view of the economy for the first time in almost three years on signs that a record contraction in the first quarter represented the worst of the recession. The BOJ kept the benchmark overnight lending rate at 0.1 percent in a unanimous vote. At 9:30 today we see the UK’s revised GDP for the first quarter, which is expected to remain unchanged. The forecasted figure is -1.9%, showing that the British economy has shrunk during the first quarter. GDP, which measures the change in the value of all goods and services produced by the economy, is the broadest measure of economic activity and primary gauge of the economy’s health. We also have Canadian Core Retail Sales m/m at 13:30 today, expected to decline from 0.6% previously, forecast at -0.2%. At 19:00, Fed Chairman Ben Bernanke speaks.