The rebound in both U.S. equities and commodities prices has reduced the
risk of further weakness in the overseas markets overnight. India's shares,
for example, could well rebound from a 4% decline overnight, particularly
since it rallied back from a 10% decline intra-day. What should worry U.S.
investors most is the possibility of contagion, where weakness in global
markets feeds on itself. The U.S. rally will help to contain the contagion.
In Japan, shares look set to open only slightly lower, judging by futures on
the Nikkei. The front-month Nikkei contract is trading at 15,810, which
would put shares down only about 0.3%. In addition, the U.S. dollar has
weakened against Asian currencies, falling to 111.3 against the Japanese yen
compared to a high of 112.94 toward the end of trading in Asia.
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Tony Crescenzi Blog TIPS in 1998 5/22/2006 2:12 PM EDT History provides a useful context for today.
Tony Crescenzi Blog Dipping Odds 5/22/2006 12:36 PM EDT Fed rate hike fears drop a bit.
Tony Crescenzi Blog What Vanadium Tells Us 5/22/2006 11:06 AM EDT The trading in this element vs. futures-based commodities helps track speculative excesses.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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