LME base metals are higher, as are U.S. stock-index futures. “We could see a rather substantial rebound off the lows set in over the course of the day, as markets are now quite oversold, and likely overshot the mark yesterday in terms of the news that triggered the sell-off in the first place,” says MF Global. “Granted, the S&P downgrade was significant, but we would argue that it was not totally unexpected--or wrong.
Moreover, the downgrade did not impact sectors that normally would be crushed by this kind of announcement, namely, the dollar and the U.S. bond market, both of which rallied sharply yesterday. This is in stark contrast to how poorly both the euro and the European bond markets behaved when trading agencies downgraded the debt of euro-zone countries.”
There were worries of the U.S slipping back into recession. “The latter is a legitimate concern, although we do not think it will transpire, as the economy still seems to have enough momentum behind it, weak as the forward thrust seems to be,” says commodities analyst Edward Meir. “Moreover, we should not underestimate the beneficial impact of the decline in energy prices in freeing up extra cash for the consumer, while moderating inflation readings, particularly in emerging markets countries.” (Kitco News)
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