Sunday, 19 August 2007

Circuit Breaker

The US Federal Reserve has provided just the circuit breaker that the markets needed.

By cutting the discount rate, not the Fed funds rate, and in between meetings as well, they have reminded the banking system that they are there when needed.

This will calm markets and the timing was excellent.

Traders will have the weekend to sober up, and sanity will be restored next week.

How does it make sense for BHP shares to fall 20%?

The ore they dig out of the ground is still there, they have fixed prices to sell it and with the AUD/USD so much lower, they will make more money.

Expect markets to stabilise this week, won't go up much, but will range trade.

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