Wednesday, November 30, 2011

Dow Jumps 490+ Points as Central Banks Provide More Liquidity

Unfortunately, I fear this is just a stop gap measure. While there is some short term relief, it does not solve the underling problems. Without an actual fix the crash is inevitable and the longer it is pushed back the more intense it will be.

"Wall Street enjoyed a big jump Wednesday morning, after a coordinated action by central banks around the world to provide more liquidity to the global financial system.

The U.S. Federal Reserve, after a similar effort in September, will “lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points.”

Wednesday’s move from the Fed was matched by corresponding actions from the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank. The new pricing applies to operations conducted as of Dec. 5, and the authorization of the swap arrangements has been extended to Feb. 13. (Read the FOMC press release here.)

While the effort to provide more liquidity may temporarily soothe the symptoms of Europe’s debt crisis and allow financial institutions easier access to funding, it does little to address the underlying roots of overburdened governments that need to be propped up while they drastically cut spending.
The Dow Jones industrial average leaped 410 points to 11,965 in the first two hours of trading, while the S&P 500 added 41 points to 1,237 and the Nasdaq gained 89 points to 2,2604. The victim of the surge was the dollar, which stumbled on the central banks’ latest move to flood the market with more greenbacks. The euro climbed to $1.3457, from $1.3315 Tuesday.

"DOW JONES INDUS. AVG 12,045.70 490.05 4.24% 11/30
S&P 500 INDEX 1,246.96 51.77 4.33% 11/30
NASDAQ COMPOSITE INDEX 2,620.34 104.83 4.17% 11/30"

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