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American Impact
It is probably not an overstatement to say that the ultimate deciding factor in how quickly the global financial crisis is resolved rests in the hands of the Americans, or more accurately, the US Treasury Secretary. In incredibly turbulent markets it is the events that have had a biggest impact on the US economy that have had the biggest impact on stock prices throughout the world.
Currently the much vaunted US bailout plan does not seem to be having the desired effect. The original plan of buying up large amounts of toxic debt from ailing financial institutions has been shelved in favour of using the billions of dollars to pump money directly into the banks, thus hopefully increasing the amount of liquidity in the market and convincing banks to start lending to customers at lower rates – not to mention each other.
If you are interested in spread betting, the American market is the area to keep an eye on. Spread betting and CFD trading companies like City Index are keen to make sure that their customers are aware of the risks before they open accounts, and the best way of avoiding the not-inconsiderable risks with spread betting is to make sure that you know your market. That’s all very well, and you might be wondering how the American market might have an impact on the sector in which you want to trade? Well the simple answer is that any market that you are trading will be affected by the state of the American economy, and, therefore by extension, the success or lack thereof, of the bailout plan.
In basic terms there are three major factors in the state of the world economy, the US economy (particularly relevant to our own index as the two share many similar companies) the price of oil, and to a slightly lesser extent the Chinese economy. At the moment all three are struggling, and if the US economy can get back on its feet then it will go a long way to helping the success of the others, and hence the success of markets around the world.
For the moment it looks like everything will remain in stasis, close to half of the money passed for the bailout plan has been spent or committed, and as yet things look to have stabilised but not improved massively – and importantly the ‘toxic’ debt is still on the balance sheets of these troubled financial institutions. Henry Paulson, the US Treasury Secretary, has declared a desire to leave the balance of the money to the Obama government to spend when power is officially transferred in January. Until then, it looks like things will stay the same in the US economy, still, whichever market you are in, it is important to keep an eye on how things are developing across the pond.
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