A flight to quality continues to drive the US dollar higher. The big story in the financial markets today was the largest loss on record for Lehman Brothers, their big write down and plans to raise capital by selling their Neuberger stake and spinning off their real estate investments.
That was not the only trouble in the financial sector. Shares of Washington Mutual plunged as capital concerns surface and on top of this, legendary investor Warren Buffett also told one of the companies that he has invested in, the Kansas Bankers Surety Co.
that they should stop insuring bank deposits above the federal government’s guarantee. As we have seen in the past, there is never just one cockroach in the closet. Goldman Sachs will announce earnings next week and they are expected to report more write downs.
Despite the lack of US economic data,
we continue to have big moves in the currency markets. The trade weighted dollar index hit a 1 year high as the EUR/USD broke 1.40 and the Australian dollar broke 80 cents. The US trade balance is due for release on Thursday. The drop in the export component of the manufacturing ISM index suggests that the trade deficit increased in July.
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