{"id":25694,"date":"2011-11-30T22:10:31","date_gmt":"2011-12-01T03:10:31","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/11\/30\/two-reasons-the-markets-should-have-fallen-last-night\/"},"modified":"2011-11-30T22:10:31","modified_gmt":"2011-12-01T03:10:31","slug":"two-reasons-the-markets-should-have-fallen-last-night","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/11\/30\/two-reasons-the-markets-should-have-fallen-last-night\/","title":{"rendered":"Two Reasons the Markets Should Have Fallen Last Night"},"content":{"rendered":"

By MoneyMorning.com.au<\/strong><\/p>\n

The U.S. Federal Reserve Bank and other key central banks have intervened<\/a> to pump more money into the banking system.<\/p>\n

The Dow rallied over 4.5% on the news. And it’s no surprise the Aussie market was over 2.5% before lunch time.<\/p>\n

<\/span>
\nDavid Hefty, chief executive officer at Hefty Wealth partners, based in Indianapolis said, ‘The central banks are sending a message that they’ve identified the problem and that they are working together.’<\/em><\/p>\n

The markets<\/strong> love hot money. And it’s easy to see why the market has gone up.<\/p>\n

But there are two reasons why the same news could have caused the market to fall… and still could before the week is out…<\/p>\n

First, ratings agency Standard & Poor’s downgraded 37 major banks.<\/p>\n

S&P says this is more to do with how they assess a bank, rather than a reflection of the banks’ credit quality. Or so the press release says.<\/p>\n

That should be bad news for banks. Not on this day. Goldman Sachs [NYSE: GS]<\/strong> was up 7.9%. Citigroup [NYSE: C]<\/strong> was up 8.9%. And Bank of America [NYSE: BAC]<\/strong> was up 7.3%.<\/p>\n

Turns out that banking bailout beats credit downgrade.<\/p>\n

Second, China unleashes 350 billion yuan into the system.<\/p>\n

Last week, HSBC said China’s Purchasing Managers Index (PMI) would come in at 48 this month. The actual number released this morning was 49. (Anything below 50 is a sign of the manufacturing sector going backwards.)<\/p>\n

It looks like the Chinese government had a sneak preview at the PMI data.<\/p>\n

Before the official numbers were released, the People’s Bank of China reacted first. Lowering the reserve requirements for all banks by 0.5% (from 21.5% to 21%).<\/p>\n

In short, the Chinese government is pumping $53 billion into the economy in an attempt to distract the market from data showing the economy has hit the wall.<\/p>\n

Shae Smith
\nEditor, Money Morning<\/em><\/strong><\/p>\n<\/p>\n

Related Articles<\/em><\/strong><\/p>\n

Why the Fed’s Actions Make Perfect Sense<\/a><\/p>\n

Too Big to Bail<\/a><\/p>\n

Swiss National Bank Intervenes…<\/a><\/p>\n

Bailouts Still Boosting the Market<\/a><\/p>\n

Was This Just Another Rigged Market?<\/a><\/p>\n

From the Archives…<\/em><\/strong><\/p>\n

Stock Market Predictions<\/a>
\n2011-11-25 – Kris Sayce<\/p>\n

Stocks on the Australian Market Today – Three Things You Need to Know<\/a>
\n2011-11-24 – Shae Smith<\/p>\n

The Gospel of Gold and Silver<\/a>
\n2011-11-23 – Kris Sayce<\/p>\n

China’s Bubble Will Pop in 2012<\/a>
\n2011-11-22 – Greg Canavan<\/p>\n

ASX Stock Market Winners, Losers and the Newly Dumped<\/a>
\n2011-11-21 – Aaron Tyrrell<\/p>\n

For editorial enquiries and feedback, email moneymorning@moneymorning.com.au<\/a> <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nTwo Reasons the Markets Should Have Fallen Last Night <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au The U.S. Federal Reserve Bank and other key central banks have intervened to pump more money into the banking system. The Dow rallied over 4.5% on the news. And it’s no surprise the Aussie market was over 2.5% before lunch time. David Hefty, chief executive officer at Hefty Wealth partners, based in Indianapolis … <\/p>\n

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