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 September 26, 2008.
• The financial crisis is changing its nature at the moment, away from fear of systemic risk attached to money and credit markets and toward emerging markets and the economic consequences of the financial crisis.
• Money markets are very far from functioning properly, but the worst is probably over following a series of initiatives from governments and central banks worldwide. Getting money markets to function normally again is probably key longer term. Banks look able to raise capital following government guarantees easing the fear of a full-blown credit crunch.
• The crisis has spread to global currency and equity markets as risk aversion is fuelling further deleveraging and forced selling. Global stock markets are down almost 50% from the in peak last autumn.
• Emerging markets have been severely hit recently and more is probably in the pipeline. Unwinding of carry and dwindling risk appetite is hitting the most imbalanced markets - these markets include CEE, Russia, the Ukraine, Turkey and South Africa.
• The economic fallout from the crisis is increasing and the economic outlook appears dire. A global recession is on the cards. We have the bulk of real economic losses (rather than the marked-to-market losses that have dominated so far) ahead of us as unemployment and delinquencies continue to climb higher.
