Forex Trading by Steven M Schultz

Reacting to a European Union instant cash loan for avoiding a European debt crisis, the Dow Jones surged Money. Early Monday, in sharp contrast to late last week, the Dow Jones today rose more than 300 points. Investors ran off scared last week with the Greek bailout in mind, as well as fear that a European debt crisis could spread around the world. The stock market lost nearly 1,000 points Thursday when fear, panic and high speed trading triggered a mass sell-off of blue chip stocks.

Dow Jones today and European debt

In contrast to investors fearing the $ 140 billion Greek bailout would trigger a European debt crisis and smother a fledgling global economic recovery, Dow Jones today is showing a significant change since last week’s dive. The Associated Press reports that in recent months Dow Jones was climbing slowly and steadily on news that the economy has been growing three straight quarters and job creation is gaining. But the stock market dropped four straight days last week as volatility returned to Dow Jones today. Investors are skittish because big swings were common when the U.S. credit crisis grew in late 2008, and the stock market bottomed out in early 2009.

Dow Jones and the Greek bailout

As European leaders, despite the Greek bailout, appear incapable of making decisions to keep debt-ridden countries from defaulting, the Dow Jones and stock market around the world have been in turmoil. Moody’s Investors Service reports that Greece may have its credit rating cut to junk within the next four weeks. Greece, at Standard and Poor’s, is already rated junk.

An averted European debt crisis?

As the euro dropped to a 14-month low last week and European leaders were finally spurred to act on the European debt crisis, Dow Jones surged. Using the euro as currency, the 16 nations agreed to offer financial assistance valued at almost $ 950 billion in loan guarantees from the European Union to countries under attack from speculators such as Portugal, Greece and Spain.

U.S. cavalry comes to the rescue

Also pitching in to help keep the European debt crisis from becoming a global financial crisis is the U.S. Federal Reserve and other central banks. As reported by the New York Times, the Federal Reserve will begin printing the dollars that will be exchanged for euros in order to provide some liquidity for European money markets and banks. The Fed said in a statement that the currency swaps were intended to make it easier for European institutions, companies and governments to borrow dollars when they need them, “and to prevent the spread of strains to other market and financial centers.”

Stock market springs back with Euro

Dow Jones numbers grew Monday as the rise in the euro and a drop in the dollar pushed the stock market higher. A weaker dollar increases the price of commodities traded in dollars because they become more attractive to outside buyers of the U.S. A drop in the dollar also helps boost earnings at U.S. companies that do business overseas. U.S. bond prices fell as investors returned to stocks on Monday. Gold also dropped. Both surged last week as investors ran from risky stocks toward safer assets.

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