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Overnight Briefing

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U.S. Stocks jump

Wed, Oct 1 2008, 07:10 GMT
by Jyske Bank Team

Jyske Bank

• EUR sharply lower against USD

• Weak Tankan

• U.S. Senate to vote on rescue plan

Today’s main events:

• EUR: Manufacturing PMI

• USD: ISM Manufacturing

• USD: Construction Spending

American Time Zone:

U.S. Stocks jump

U.S. stocks jumped the most in six years as growing expectations that lawmakers will salvage a USD 700 billion bank-rescue package helped the Standard & Poor's 500 Index recover more than half of yesterday's 8.8 % plunge. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. jumped more than 11 % as Senate leaders vowed to resume work on the bailout plan this week after its rejection spurred the market's steepest decline in two decades. Hess Corp. and Schlumberger Ltd. added more than 7 % as optimism about the plan helped oil rebound from a USD 10-a-barrel drop. All 10 industries in the S&P 500 advanced.

EUR sharply lower against USD

The euro fell the most against the dollar since the introduction of the shared currency in 1999 after France and Belgium led a statebacked rescue of Dexia SA, as the widening financial crisis forces governments to prop up financial institutions across Europe.

Oil recovered after Monday

Crude oil rose, rebounding from its biggest drop in seven years, after U.S. lawmakers said they intend to salvage a USD 700 billion bankrescue package that may avert an economic slowdown.

Far East Time Zone:

Weaker than expected Tankan

Business sentiment at big Japanese manufacturers turned negative for the first time in five years, a closely watch Bank of Japan survey showed, as the world's No.2 economy headed towards recession amid a global slowdown and financial market turmoil.

Underlining growing uncertainty over the outlook, the central bank's tankan quarterly corporate survey also showed big manufacturers expect conditions to worsen in the fourth quarter.

The tankan came on top of a recent set of weak reports including exports and industrial output, while a political row over a USD 700 billion U.S. bailout for Wall Street prompted more concerns about the outlook for Japan's export-reliant economy.

Financial markets showed little reaction as they expected a poor reading, while the Nikkei stock average climbed 1.2 % after a Wall Street surge prompted by hopes that Washington will revive a plan to stabilise the U.S. financial sector after its earlier defeat on Capitol Hill.

The headline index for big manufacturers' sentiment stood at minus 3, down from plus 5 in the previous survey in June and below the median market forecast for minus 2.

It was down for the fourth straight quarter and the lowest since June 2003. The index for December was seen at minus 4, suggesting firms expect conditions to worsen over the next three months.

U.S. Senate to vote on rescue plan

The U.S. Senate agreed to vote on Wednesday night on a new version of the USD 700 billion bailout package for Wall Street that will include a big increase in the amount of bank deposits protected by the government's insurance program, a Senate aide said on Tuesday.

Senate Majority Leader Harry Reid, a Nevada Democrat, received unanimous consent from the Senate to schedule the vote on the package, which the White House says is imperative to stem a credit crisis that has spread beyond Wall Street to claim more European banks.

If the bailout package passes in the Senate, as expected, it will put more pressure on the House to follow suit when it meets again on Thursday.

IMF chief: Europe should ready plans

The United States needs to act urgently to shield its economy from an escalating credit crisis and Europe must ready plans in case banking problems spread, the head of the International Monetary Fund said on Tuesday.

"We're right at the moment where action is needed," IMF Managing Director Dominique Strauss-Kahn told Reuters. "A non-perfect plan is better than no plan at all," he said of the USD 700 billion bailout plan rejected by the U.S. House of Representatives on Monday.

As the crisis has spread beyond Wall Street, European countries have stepped up their efforts to avoid bank defaults but the lack of a pan-European regulator makes it more difficult to respond to the crisis, Strauss-Kahn said.

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Published on  Wed, Oct 1 2008, 07:17 GMT