Monitor

Financial crisis update

Fri, Jul 11 2008, 09:32 GMT
by Peter Possing Andersen

Danske Bank A/S


The aim of this publication is to provide an overview of current stories/issues in relation to the financial market crisis. We update this publication regularly. The previous Financial Crisis Update was published on May 21, 2008

  •  Since we last published Financial Crisis Update, jitters have returned to financial markets and risk appetite has been scaled down. Problems in the money markets remain unsolved, but have generally not worsened. Credit spreads have generally widened and financial equities have seen new cyclical lows. Most recently the jitters have centred on a further need for recapitalisation in the government sponsored agencies, Freddie Mac and Fannie Mae - the largest providers of prime mortgage loans to the US mortgage market.

  •  While technical movements and forced selling set the agenda in the beginning of the crisis, focus is now turning to the consequences for - and the state of - the real economy. So far this is not a pretty sight and for the moment we fail to see any room for substantial tightening of credit spreads despite the current high levels.

  •  While new losses from financial institution continue to arrive it has been on a much smaller scale in Q2 than was the case in Q1 and Q4. Bloomberg currently report USD403.5bn in losses from financial institutions worldwide. Over the course of Q2 recapitalisation has continued. Bloomberg reports USD320.1bn in capital raised, of which USD171.9bn came in Q2. Still potential losses might be much bigger when compared with the standing IMF estimate of mortgage-related losses of in total USD1 trillion. Great uncertainty regarding the size of future losses prevails. However, it remains very likely that more bad news is in the pipeline. Hence the risk of negative surprises going forward remains high.

  •  Lending standards continue to be tightened in both Europe and the US, underlining the overall picture of tightening credit availability globally. Along with pressure from high commodity prices and declining assets prices, this is likely to feed the deleveraging of the global financial system further.

Published on  Fri, Jul 11 2008, 09:35 GMT

Archive

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

Legal disclaimer and risk disclosure

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Interested in forex trading? forex brokerage firms!


MF Global UK Limited
Contact the broker/FDM
Open a demo account		ACM Advanced Currency Markets SA
Contact the broker/FDM
Open a demo account
IG Markets
Contact the broker/FDM
Open a demo account		ODL Securities Inc
Contact the broker/FDM
Open a demo account		Crown Forex SA
Contact the broker/FDM
Open a demo account

FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)

[Read Premium full description]


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

©2008 "FXstreet.com. The Forex Market" All Rights Reserved.