Some extreme measures (coordinated effort for easy access to US dollars ) from US/Euro/England/Canada/Japan central banks last week and reducing reserve requirement by China sent the markets soaring by 10% in Small caps, Emerging markets and in European markets. Did the central banks see such a dire danger that they have to take a step as big as this.. May be they did or they are just following the earlier recommendation of Tim Geithner on providing a shock and awe response to the crisis .. Will it be enough to save Euro and for how long?
Fed's discount window is 0.75% for US banks, but the Fed is offering 0.5% for European banks . The cheaper US dollar for European banks should help with liquidity problems ..
Technically, US dollar might be seeing double top in the intermediate term and this drop in dollar is fueling the equities and the gold. Besides, the not so gloomy economic reports are indicating that the economy might be bottoming ... Unemployment report improved marginally to 8.6% ..
With very few US economic reports this week the markets might be inclined to head higher, but watch the developments in Europe closely though ..
Last week's (week over week) market Sectors Returns and Internals: