Finexo Market News and Analysis

• FX: USD is lower and the market is so far not too impressed by the Paulson/Bernanke Plan.

• Fixed Income: Bunds rallying towards 114. Treasuries still offered. JGB’s seem to have bottomed out.

• Stocks: Most sessions moderately down.

• Commodities: Mostly ranging, but precious metals looking bid.

• In what has reflected the fact that the bank problems are not limited to American Banks, Hong Kong’s Bank of East Asia has now come under the strain of rumors of a bank run, although these rumors have been denied by the authorities and bank management. Hong Kong has not had any bank runs since 1993, the creation year of Hong Kong Monetary Authority.

• In a sign of further trouble to the global liquidity, Chinese banking regulators are speculated to be blocking Chinese domestic banks from lending to US financial Institutions in the inter bank markets. This has however has been denied by the Chinese Authorities.

• Facing a public discontent and resistance by the Congress, Treasury Secretary Paulson has stated his willingness to accept the changes to the rescue package that would ascertain that the bank executives are not unduly compensated within the rescue package and that the government could buy direct equity stakes in the firms being assisted.

• In a congressional hearing yesterday, the Fed Chairman Bernanke has repeated his warning over the serious threats to the financial system and highlighted that the spillover effects from the credit crisis to households and businesses can be already be seen.

• President Bush was later in a speech confirming the message from Bernanke/Paulson. The speech was surprisingly gloomy and compared the current crisis with that of the Great Depression.

Todays forex Updates

• FX: EURUSD sustains below the 100 weekly SMA currently at 1.4208, but slowly starts to look soft with heavy bids around 1.4050. Carry trades well supported in Asia despite risk aversion in equities.



• Fixed Income: Bunds made a strong comeback yesterday, also supported by weak US home sales and flight to safety. Losing momentum in Asia though with JGB’s on debt issue speculation.



• Stocks: European session generally down 0.5-2.0%, looking to re-establish downturn trend. Ugly day in the US on Lehman worries. Indexes down 2-3.4%. Asia not taking that big a hit on bullish China numbers. Nikkei down 0.4%, Hang Seng 1.6%.



• Commodities: Metals lower with both gold & silver taking out key support levels, however, gold not managing a follow-through. Oil slightly higher in Asia.

• In a move that surprised the markets, OPEC has agreed to an output cut. The change would see the production effectively being curbed by half a million barrels a day. Before the decision, the oil prices had seen 5-month lows, or about 30% below the peak prices of this year. OPEC

had been expected to keep production levels unchanged but has instead taken on a more price defensive posture.



• In overnight trading, the Asian stocks have added to previous session’s losses as weak demand factors are now reinforced by sliding metals prices, hurting the large resource producers.



• As the stock price of Lehman Brothers continued to slide with no result from the talks it had held with Korea Development Bank, the firm has come under growing pressure to find a way out of its troubles. The markets will be keenly observing as the bank will be announcing its Q3 results before the US opening today, a week earlier than planned.