Analytics

Last week, PFTS index showed a substantial rise – by 11.5%, up to 306.66 points, having passed the threshold of 300 points. Such market developments were prompted, on one hand, by external factors: the US FRS passed another decision to cut interest rates down to 0-0.25%, which greatly cheapened financial resources for the US economy, while leaving the US government without regulatory financial levers in the future. The US president elect Barack Obama opted for development of a new two-year plan of recovery of the US economy for a much greater sum than was previously quoted by Obama’s team - $600 billion. Positive dynamics at the end of the week were further boosted by the US government allocating funds to rescue car makers: General Motors Corp. and Chrysler LLC will get $13.4 billion worth of credits from the government under the Troubled Asset Relief Program; another $4 billion are to be provided in February. On the other hand, domestically, the market was kept afloat by the rapid devaluation of the hryvnia to the record-low rates against the US dollar and euro. This prompted market actors to reassess some issuers, first of all, enterprises exporting products for US dollars.

The beginning of the week was marked by a surge of optimism prompted by Barack Obama’s statements of large-scale public expenses planned in the USA and allocation of $14 billion worth of governmental assistance for the leading US car makers to cope with the crisis. However, by the weekend, optimism yielded to a sharp decline in spirits. The plan of assistance to the Detroit Troika was not backed by the Congress, which means that this year, those companies may hardly count on anything. This, in turn, puts their bankruptcy on the agenda. More distant forecasts look even grimmer – bankruptcy of the sector will prompt cuts of hundreds of thousands working places in the USA and further slowdown of the economy, involving reduction of demand for resources.

The whole of the last week, the PFTS index mainly stayed in the red, pressed by upsetting internal and external news, and fell by over 5% in course of five days.

In course of the week, the Ukrainian share market was developing in the wake of the trends of the world stock markets, while the volumes of trading remained low.

Last trading week, the PFTS index demonstrated varied trends, reversing from green to red and vice versa. After five trading sessions, the PFTS index lost 2.64%.

The week that so promisingly began with the rise of the main stock markets brought mixed results: developing markets continued their decline, while indexes of developed economies rose by 3-5%, despite a strong drop in the middle of the week. The growth of stock markets in the developed countries was prompted by joint efforts of governments fighting the financial crisis and announcement of concrete steps intended to help the economy. In particular, $250 billion out of $700 billion promised by the US Administration were allocated to purchase stocks of leading US banks. In Europe, the European Central Bank, the Bank of England and the Swiss Central Bank reported readiness to provide unlimited amounts of funds for the banking system.

Last week will be remembered for the unprecedented collapse of the global financial markets. Shares were continuously falling for nearly a week, despite the authorities’ attempts to save financial markets. The US FRS, ECB, the Bank of England, the Bank of Canada, Swedish and Swiss central banks on Wednesday simultaneously cut basic interest rates by 0.5 percentage points. However, even that concerted reduction of interest rates by the world’s leading central banks failed to convince investors of inevitability of recession. Oil cheapened by $10 – down to $78.66 per barrel. MSCI World Index last week dropped by 20%, for the first time over 38 years of its calculation. The week was also the unluckiest over 112 years of history of the US Dow Jones index that dropped by 18.2%. Ukraine’s PFTS did not even start trading on Wednesday and Friday, amidst fears of a stock collapse.

Last week, stock markets saw the influence of the following key developments: the plan of financial market salvation; threatened default of large European financial institutions (Germany’s second largest mortgage agency Hypo Real Estate, Bradford & Bingley bank of Great Britain, Iceland’s biggest Glitnir Bank, three banks of the Fortis group); further decline of raw material prices. The unprecedented Monday’s drop in the US stock indices was caused by the rejection of Paulson’s plan that seemed so promising by the House of Representatives. Despite Wednesday’s passage of the plan providing for extra tax preferences for households and business, on Wednesday and Thursday, US indices continued their decline because of the uncertainty as to the ways of the program implementation and release of negative indicators of the US economy, pointing to the beginning of recession.

The Ukrainian stock market failed to recover after the decline of the first half of the year in the third quarter. For three months in a row, global markets continued their pressure, pushing investors to get rid of assets. The general decline of the market was aggravated by speculative spirits of stock gamblers who continued to earn from «short trading». A new local trough was reached on September 18 at 347 index points after a more than 14% decline two days earlier against the background of reports of Lehman Brothers’ collapse and fears of AIG bankruptcy.

Last week was characterized by neutral or even moderately-positive dynamics of indexes of developed markets, with considerable price abatement in the majority of developing markets. In the course of the week official data on the economy of USA pointed at some weakening of inflation risks with simultaneous worsening of the economic growth indices. At the beginning of the week the Ministry of Finance of USA announced about establishment of public management in Fannie Mae and Freddie Mac. Besides, the state opened credit lines for the companies up to $100 billion. At the same time, one of the biggest investment banks Lehman Brothers reported on quarter damage to the amount of $3.9 billion, which is twice as worse than expected. Positive influence on the shares of developed countries was exerted by considerable abatement of prices for oil (Brent -6,3%) and other base resources.