Monthly Archive for October, 2008

The Downturn

Published on October 24, 2008 in International Business and International Finance. 0 Comments Tags: , , , .

Global share markets have fallen back amid investors’ widening fears of a sustained worldwide economic recession.

It is startling how quickly and savagely the global credit crunch is morphing into a full-blown economic crisis.

The latest gloomy news on the economy took the euro below $1,26. Six months ago, a euro would buy as much as $1,60. Such has been the severity of the recent shifts in currency markets that the euro is one of the better performing global currencies. It is down by 14% against the dollar this year; the pound by 22%. A good chunk of that fall took place in the past week.

A handful of rich-country currencies have fared worse. The Norwegian krone and Canadian, New Zealand and Australian dollars have fallen by still more, partly a reflection of the worsening prospects for economies that are sensitive to falling oil and commodity prices (Source).

Not every currency can go down. As investors pull funds from one country they need to find a new home for their money. The favoured destination for now-skittish capital is Japan. The yen which has risen, according to intra-day trading, by a fifth against the dollar since the start of the year, is proving attractive because of Japan’s status as the world’s biggest creditor nation.

When credit is drying up, investors steer clear of countries with current-account deficits, since their economies rely on overseas borrowing to sustain them. But Japan habitually runs trade surpluses and, as a consequence, has built up a big stock of foreign assets (Source).

Continuously updated coverage on the global financial turmoil can be found here: Reuters|From Wall St to Your Street, BBC|Global Financial Crisis, and BBC|The downturn .

Looming Real Economy Burst

Published on October 16, 2008 in International Finance. 0 Comments Tags: , .

The far-reaching consequences of the global financial crisis are becoming apparent for the real economy.

Today (Thursday 16th), the financial crisis shifted gears owing to fears for a global recession and battering financial markets. Even as governments sought yet more action to pull the world economy from the brink of collapse.

Tokyo stock market’s benchmark Nikkei average fell below the important level of 13,000 for the first time since January 1986 in early trading on Thursday, amid intensifying worries of a global equity meltdown. Shares in London dived through the psychologically important 4,000-level today as panic about the strength of the global economy continued to spread from America to Asia and Europe.

Gains, gains, everywhere

Published on October 14, 2008 in International Finance. 0 Comments Tags: , , .

The eight-day losing streak ends Monday after central banks and governments announced measures to bolster the global financial system.

At the close Monday (October 13th), the Dow Jones industrial average soared 936.42 points, or 11.08%, to 9,387.61 — the biggest point gain ever. The S&P 500 index climbed 104.13 points, or 11.58%, to 1,003.35, boosted by shares of investment banking and brokerages and auto manufacturers. The Nasdaq composite index rose 194.74 points, or 11.81%, to 1,844.25.

Furthrmore, equities and currencies in Asia, Latin America, Europe and the Middle East rallied Monday as well. Rebounding from last week’s steep losses after governments around the world laid out measures in response to the global financial crisis, boosting risk appetite and investor sentiment.

A round up of the global turmoil around the world can be found here.

Top 10 blogs to get you through the banking crisis

Published on October 13, 2008 in Ranting and Raving. 1 Comment Tags: , .

Perplexed by plummeting indexes? Worried about your bank’s future? Comment Central’s rounded up ten of the best blogs to guide you through the banking crisis:link.

Global Stockmarkets Plummet

Published on October 10, 2008 in International Finance. 0 Comments Tags: , , , .

Stock markets in Asia and Europe plummeted on Friday October 10th. Japan’s stockmarket ended the week in disarray: the Nikkei 225-share index fell by 24% on the week, twice the weekly fall of the 1987 crash. It is now at five-and-a-half-year lows. Europe followed suit. London’s FTSE 100 slumped by more than 10% within minutes of opening; by mid-morning European stocks were also down, with Germany’s DAX index down by more than 8%. Amid widespread anxiety the oil price also tumbled, to around $81 a barrel, its lowest level in a year.

The falls underline that stockmarkets, traumatised by the near-paralysis in credit markets, the collapse of once-mighty banks and the prospect of global recession, are suffering what has been dubbed a “cascading crash”: a series of blows which, added together, are stomach-churning. Source: BBC, The Economist and BusinessWeek.

“Major global downturn” says IMF

Published on October 8, 2008 in International Finance. 0 Comments Tags: , , , .

The world economy is entering a major downturn in the biggest financial crisis since the 1930s, said the International Monetary Fund (IMF).

In a hard-hitting report, the IMF warned the global economy was facing its most dangerous crisis for 70 years. World economic growth will slow substantially this year, and only pick up modestly later in 2009, it said.

Inside Wall Street’s 36 Hours of Alarm

Published on October 2, 2008 in International Finance. 0 Comments Tags: , , .

“If we don’t do this, we may not have an economy on Monday.”

So said Federal Reserve Chairman Ben Bernanke, according to The New York Times, in an emergency meeting on Thursday, Sept. 18 — part of a 36-hour period that The Times says included “two of the scariest days ever in financial markets.”

It was during this period when Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. decided to use the “break the glass” rescue plan they had been developing, a plan that became the $700 billion bailout proposal being hotly debated in Congress.

The NY Times article, reported by Andrew Ross Sorkin, Diana B. Henriques, Edmund L. Andrews and Joe Nocera and written by Mr. Nocera, recounts the fear that ran up and down Wall Street on these days. It was the big investors who were the most panicked, Mr. Nocera wrote.

Global Financial Crisis

Published on October 2, 2008 in International Finance. 0 Comments Tags: , , , , .

A detailed background analysis on the current situation around the financial crisis can be found here (BBC Global Financial Crisis), here (Wharton, Wall Street’s Day of Reckoning: What’s Next), and here (HBS, Financial Crisis Caution Urged). A graphical overview of the crisis can be found here.