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Overnight Briefing

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U.S. equities tumbled

Tue, Sep 23 2008, 05:23 GMT
by Jyske Bank Team

Jyske Bank

• The dollar sharply lower

• Sharp rally in WTI crude oil October contract

• Dollar weighed by worry of U.S. bailout cost

• Mitsubishi UFJ buys 20 % stake in Morgan Stanley

Today’s main events:

• DEM PMI Manufacturing & services

• EUR PMI Manufacturing & Services

• USD House Price Index

• USD Consumer Confidence

American Time Zone:

U.S. equities tumbled
U.S. stocks dropped, led by banks, retailers and technology companies, on speculation the Treasury's plan to buy toxic assets from financial firms will fail to prevent a recession and as a USD 15-a-barrel jump in oil threatened to damp consumer spending. The Standard & Poor's 500 Index lost as much as 3.9 %, erasing almost half of its rally over the previous two days.
Sovereign Bancorp Inc., Marshall & Ilsley Corp. and Washington Mutual Inc. sank more than 20 % on speculation the bank bailout will lower the value of mortgage loans they hold. Apple Inc. and Cisco Systems Inc. dragged down computer stocks on concern slower growth will reduce sales.

USD sharply lower
The dollar weakened the most against the euro since the Euros inception in 1999 to 1.4810 and fell versus the yen on concern a U.S. proposal to buy USD 700 billion of troubled assets from financial firms will deepen the budget deficit.
The U.S. currency weakened for a fourth day against the euro in its longest stretch of decline since June and touched the lowest level this month before reports this week forecast to show decreases in home sales and durable goods orders in August Crude oil prices surged.

Sharp rally in WTI crude oil October contract
Crude oil climbed more than USD 25 to USD 130 a barrel, the biggest gain ever, as the contract expired and the market was caught short. However, the November contract had a more modest rise of USD 6 to close at USD 109.

Far East Time Zone:

Dollar weighed by worry of U.S. bailout cost
The dollar came under pressure on Tuesday on concerns about the cost to finance the U.S. bailout package to shore up its financial system and ease credit crisis.

The USD 700 billion package, which would give sweeping powers to the U.S. Treasury to buy mortgage-related bad debts from financial firms, is awaiting congressional approval which looked set to drag into next week.

In addition to worries about growing U.S. budget deficit, market players were also doubtful of the effectiveness of the package to resolve the financial crisis.

The euro was up 0.3 % at USD 1.4826; near a 1-month high of USD 1.4867 hit on Monday when it staged its biggest one-day gain since its inception in January 1999.
In addition to the weak U.S. fundamentals, the weakness in global equities markets on heightening risk aversion also opened the way for the dollar's drop against the yen, traders said.

Mitsubishi UFJ buys 20 % stake in Morgan Stanley
Morgan Stanley agreed to sell an equity stake of as much as USD 8.5 billion to top Japanese bank Mitsubishi UFJ Financial Group Inc, speeding up its transformation into a commercial bank and improving its survival prospects in turbulent times.

The preliminary investment agreement announced on Monday came a day after Morgan Stanley and archrival Goldman Sachs Group Inc was granted approval to become bank holding companies regulated by the U.S. Federal Reserve. The moves effectively end the investment banking model that dominated Wall Street for more than 20 years.

The deal with Mitsubishi, the world's No. 2 bank by deposits, helped send Morgan Stanley shares soaring as much as 14 %, even as the Securities Broker-Dealer Index fell 9.4 %.

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Published on  Tue, Sep 23 2008, 06:23 GMT