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Overnight Briefing

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Dow Jones down 5.1 %

Wed, Oct 8 2008, 06:43 GMT
by Jyske Bank Team

Jyske Bank

• Bernanke signalled rate cut

• Room for lower interest rates in Europe

• Australia central bank expands support for banks

Today’s main events:

• DEM Industrial Production

• USD MBA Mortgage Applications

• USD FED’s Charles Plosser speaks

American Time Zone:

Dow Jones down 5.1 %

U.S. stocks fell, sending the Standard & Poor's 500 Index below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.

Bernanke signalled rate cut

The yen dropped from near a three-year high against the euro as the Federal Reserve's announcement that it will buy commercial paper encouraged investors to resume buying higher-yielding assets funded in Japan.
The dollar fell from a 14-month high versus the euro on speculation the Fed's plan will ease demand for U.S. currency funding among banks. The dollar erased its gain versus the yen as Fed Chairman Ben S. Bernanke signalled policy makers are ready to lower interest rates as the credit freeze worsens the outlook for U.S. economic growth.

Oil higher on OPEC speculation

Crude oil rose, halting a 13 % decline in the past four days, amid speculation OPEC will curb output because of falling prices.

Far East Time Zone:

Room for lower interest rates in Europe

The head of the International Monetary Fund, Dominique Strauss-Kahn, said on Tuesday there was room for lower interest rates in Europe, as pressure increases for a coordinated global response to the financial crisis.

Asked on U.S. public television what kinds of measures should be included in a coordinated plan, Strauss-Kahn replied, "Interest rates is one point and certainly there will be room now for Europeans to have lower interest rates."
But he said while countries were facing a crisis of confidence in global markets, traditional economic policy measures were not always as effective.

Australia central bank expands support for banks

Australia's central bank on Wednesday said it was expanding the liquidity assistance it provides commercial banks in its money market operations, seeking to ease funding pressures from the global credit squeeze.

Just a day after slashing interest rates by an aggressive 1 percentage point, the Reserve Bank of Australia (RBA) said it would accept more types of debt as collateral for loans and would lend to banks for longer periods.
That should help meet banks' demand for longer-term funding which has been hard to get and more costly amid the credit crunch.

China might cut interest rates soon

External and internal conditions are ripe for China to cut interest rates soon to give the economy a lift, an official newspaper said in a front-page commentary on Wednesday.

The central bank unexpectedly allowed the yield at its weekly auction of one-year bills to tumble nearly 10 basis points on Tuesday in what traders saw as a strong sign of an imminent easing of monetary policy.

"Unless something abnormal happens, a rate cut can come at any minute after September headline economic indicators including CPI are released," the China Securities Journal said.

Beijing is scheduled to announce its thirdquarter economic figures on Oct. 21.

Japan MOF: Tension over global economy rising

A senior Japanese Ministry of Finance official said on Wednesday the recent market turmoil is affecting the real economy and overall tension is heightening.

"A number of things have been taking place in the United States and Europe recently and they are having an impact on the real economy," the official told reporters.

The official also said Japanese financial institutions are relatively unscathed in the current financial crisis.

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Published on  Wed, Oct 8 2008, 06:50 GMT