Market Volatility Expected as US Regulator Sues 17 Financial Institutions

Strategic Insights -

The US market direction this morning will be dominated by the news that a US regulator is suing 17 financial institutions for mis-selling billions of dollars' worth of mortgage bonds. The targets include major US banks such as Goldman Sachs and Bank of America, as well as international banks like Barclays, RBS, Deutsche Bank, and Societe Generale. This lawsuit, announced just after the close of US stock markets on Friday, comes on the heels of a disappointing non-farm payrolls number that showed zero jobs added in August, sparking concerns about job creation and the need for further monetary stimulus. The timing of the Labor Day holiday in the US also adds to the uncertainty, as investors will have to wait until tomorrow to react. Against this backdrop, market participants will be closely watching speeches from Federal Reserve heads, including Ben Bernanke, as well as interest rate decisions from central banks in Australia, Canada, Japan, the UK, and the ECB, which may signal a rate cut or a complete u-turn in monetary policy.

Key Takeaways:

  • The US regulator is suing 17 financial institutions for mis-selling billions of dollars' worth of mortgage bonds, which ultimately proved toxic when the US housing market collapsed. (Sources: [1])
  • The targets include major US banks such as Goldman Sachs and Bank of America, as well as international banks like Barclays, RBS, Deutsche Bank, and Societe Generale.
  • The lawsuit was officially announced just after the close of US stock markets on Friday, potentially exacerbating investor angst.
  • Today is a Labor Day holiday in the US, forcing investors to sit on the sidelines until tomorrow to react.
  • The non-farm payrolls number showed zero jobs added in August, sparking concerns about job creation and the need for further monetary stimulus.
  • The market is expecting speeches from Federal Reserve heads, including Ben Bernanke on Thursday.
  • Central banks in Australia, Canada, Japan, the UK, and the ECB will be announcing interest rate decisions, with potential implications for monetary policy.

Statistics:

  • The US regulator is suing 17 financial institutions for mis-selling billions of dollars' worth of mortgage bonds.
  • The non-farm payrolls number showed zero jobs added in August.
  • The market is expecting a 1 per cent or 62 points decline in the FTSE 100 index, opening at 5,230.
  • The German DAX is expected to open down 73 points at 5,465.
  • The French CAC is quoted down around 40 points at 4,108.

Sources:

  • Martin Slaney (Director of Global Dealing Operations at GFT) (no specific date)