Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark's newest book, The Swing Trader's Bible - co-authored with CNBC/Fox News regular guest Matt McCall - will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.
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1. FOMC Meeting Minutes Released at 2:00 PM EST
The News:
In the early afternoon on Tuesday, minutes from last week's Federal Open Market Committee (FOMC) meeting will be released into the market.
The Breakdown
All eyes will be on the FOMC minutes today, as the market attempts to gauge what Bernanke and others within in the Federal Reserve are looking at within the market. Traders will be looking for any changes in language and tone, potentially indicating an increase in rate-setter's worries regarding the present economy.
The Bottom Line:
While many are looking for a quarter-point cut in the June meeting, the FOMC may actually hold rates steady, especially if the major indices hold ground. Only a severe change in tone within the FOMC minutes will trigger a dramatic move within the market.
2. IMF to Sell $6 Billion in Gold
The News:
While a final decision is yet to come forward, the International Monetary Fund (IMF) is presently proposing the sale of $6 billion in gold.
The Breakdown:
If you think the U.S. economy is the only one having financial troubles, think again. The IMF is looking down the barrel of a $400 million shortfall "in funds that are projected over the next two to three years," according to the BBC.
In the past, the IMF has been able to keep itself in the black by loaning money to emerging and developing countries that need financial assistance. The amazing thing is that even though there is plenty of poverty in these countries, their GDP's are booming, and thus many are no longer borrowing like they used to.
Case in point, in the IMF's own 2008 Global Outlook, the organization predicts GDP for advanced economies to average 1.8% this year, while emerging and developing economies are expected to average 6.9% growth.
The Bottom Line:
The IMF sale must be approved by Congress, and while the sale won't sink gold prices immediately, the IMF says it will disperse the gold into markets over several years. Finally, according to the BBC, "the IMF's gold sale would be used to buy US government and corporate bonds." Fact is, even with the subprime debacle, the United States is still the safest place to invest on earth.
3. British Real Estate Markets Melting
The News:
On Tuesday, the UK Halifax Housing Price Index fell by 2.5%, a significant decline over the consensus estimate of -0.3%.
The Breakdown
While housing prices in the UK increased 1.1% year over year in March, the growth was the slowest in more than a decade. The fact of the matter is, the UK is now feeling the credit crunch too, as witnessed in declining housing prices and less loans available to subprime borrowers.
Earlier in the month, the BBC reported the number of new mortgages approved in February was 39% lower than the same month in 2007. The Financial Times reported as much as 20% to 25% of all UK loans outstanding could be subprime.
In the recent Standard & Poor's report: "European Economic Forecast: Major Corrections On The Cards As Housing Markets Turn Down" the firm uses the terms "likely" and "painful" when describing the UK and Spain's housing markets.
The Bottom Line:
In the BOE interest rate meeting on Thursday, Governor Mervyn King will undoubtedly assure the market with a rate cut from the present 5.25%. Most in the market are expecting a quarter-point cut. However, Tuesday's housing price news could spur a larger surprise cut. Most likely the Main Refinance Rate will end up at 5.0%, but traders do need to prepare for a "surprise" just in case. The UK is in trouble... imagine the U.S. one year ago.
