Sunday, August 30, 2009

Fed Cuts to Mark Pre-Xmas Trading

Investors head into what for many will be the last full trading week of the year expecting more stimulative U.S. interest rate cuts but rattled by emerging dissent over how governments should boost ailing economies.The price of oil, meanwhile, is likely to be in particular focus with oil-producing nations meeting to discuss supply cuts at a time when lower prices are one of the few areas of easing pressure on monetary authorities.Investors needed no new stress after a year which has seen the global banking model break down, the value of stocks halve, lending freeze up and volatility soar, but the new wrinkle is squabbling among authorities about how to proceed."The problem is that when you have politics involved ... you get a lot of back and forth. It's not like when you watch economic data," said Michala Marcussen, strategy director at Societe Generale Asset Management.Failure by U.S. lawmakers last week to agree a bail out for America's top automakers was a shock to the system for investors who have become used to governments and central banks pledging to do what it takes to build confidence and flood the global economy with money.There was a similar U.S. Congress impasse over a financial bailout package earlier in the year, which ended in a compromise. But the latest fight means there will be no automaker bailout passed this year.

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