New Overnight Developments Abroad: Market Performance Worse Than Ever

October 10, 2008

Gold rose 4.6%.  Just about everything else is down in very panicky trading.

The world stock index, MSCI, is headed by a weekly loss near 19%, the biggest tumble since at least 1970.

Asian stocks: Nikkei -9.6%.  Hong Kong -7.2%. Philippines -8.3%.  Singapore -7.3%.  Thailand -9.6%. South Korea -4.1%.  Indonesian bourse remained shut.

European stocks: German Dax -9.1%.  Paris Cac -8.4%.  British Ftse -7.4%.   Australian stocks tumbled 8.3%.  South African stocsk off 5.0%.

Yamato Life in Japan failed.  Wells Fargo won the bidding war with Citibank over Wachovia.

IMF is said to be preparing bailouts.  The WSJ said the U.S. government is contemplating the guarantee of all bank deposits and bank debt.  Interbank rates for dollar liquidity hit their highest levels of the crisis.  Central banks in Euroland, Australia, and Switzerland provided more emergency liquidity.l

Daily discount window borrowings at Fed last statement week hit record of $420 billion, 14.2% greater than in the prior week.

Central Bank authority in Singapore, MAS, eased for the first time in 5 years, ending the appreciating bias on the targeted Singapore dollar.

President Bush to make an announcement at 14:00 GMT today.  He reportedly wants to convene an emergency summit of G8 leaders.

G7 finance ministers and central bank governors will be meeting today in Washington and issuing a joint statement afterward.

Oil slid another 5.7%.  High-yielding, commodity-sensitive currencies continued to be hammered.  USD rose 3.1% against the Australian dollar, 1.5% against the kiwi, and 0.9% against the Canadian dollar.  Sterling also remains very weak, shedding another 0.6% against the dollar.  The Chinese yuan fell 0.2%.

The yen gained 0.7% against the dollar on the belief that carry trades will unwind further.  Still no interest rate cut by the Bank of Japan despite 31.6% plunge of the Nikkei since September 24th.  Japanese money markets showed great strain today, unlike earlier, and the 10-year JGB yield at one point spiked upward by as much as 12.5 basis points to 1.58%.  Japanese financial markets until now had been comparatively stable.

Emerging markets are feeling the contagionBusiness sentiment in China dropped 8.2% in 3Q08 following a 4.1% slide in 2Q08 to its lowest level since the SARS epidemic in 2003.  Chinese car sales fell 1.4% y/y in September after a 12-month drop posted in August.  Previously, car sales had been climbing at more than a 10% pace.  The South Korean won needed heavy intervention support after initially dropping as much as 5%.  The won traded in an extremely wide band of 1453.9 to 1227.2 per dollar overnight.

August industrial production was reported by France (down 0.4% m/m and -2.1% from a year earlier) and Italy (up 1.4% m/m and -5.3% y/y).  Both results were better than forecast but considered irrelevant in light of the subsequent loss of avenues of financing.  Worsening trends lie ahead.

Japanese M2 and M3 posted on-year growth in September of 2.2% and 0.9%, respectively.  Bank loads climbed 1.8% y/y excluding Shinkin and 1.6% including such institutions.

Canada reported a shockingly high 107K leap in jobs last month, a huge contrast to America’s 159K drop, but the jobless rate stayed at 6.1%.  Jobs were expected to rise about 12K following a net 40K decline in July-August.  All but 10K of the rise in jobs consisted of part-time workers.  While the total increase in jobs was spread across many industrial and service sectors, it was concentrated in youth employees and workers older than 55.


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