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Friday, October 24, 2008

Off To The Races

Update: WTI Cushing spot moves this morning at under $63, lower than NYMEX futures.

Oil falls again, even though OPEC announces an emergency production cut. Dated Brent Spot moved this morning below $60. US NYMEX futures fell below $64 and then $63.

US index futures were halted in European trading due to their massive fall. Trading will pick up again when the US exchanges open.

UK GDP for Q3 was reported -0.5, causing BNP Paribas boys to predict 150 basis points in cuts by the UK central bank (BoE) through December. The pound fell further. The European manufacturing and services survey for Europe was reported to have contracted sharply in October. Light truck sales in Europe are trending down, and Volvo cut its sales projections again. The Euro and pound both fell sharply against the USD, and the USD fell sharply against the yen. These are huge moves. So where does this leave Japanese manufacturers?

The zloty (Poland), the forint (Hungary) and the rand (South Africa) have all fallen sharply this week, even though Hungary raised its main bank lending rate by 300 basis points. Denmark's krone is also weakening, and Denmark raised its main rate 50 basis points to 5.5%. Ukraine's credit rating was downgraded again.

Asia was pretty much whacked. India's rupee and its main companies are sliding again. Car sales have weakened sharply and some major companies are reporting sliding profits.

Toyota reported a 4% drop in global sales in the third quarter. Japan's situation is rougher than most people are willing to conceive:
The country's huge trade surplus plunged 94% in September from the same month in 2007 as exports continued to lose ground and imports again surged.
Growth did contract in the June quarter, but the flagging export performance and weakening industrial production figures are suggesting even more strongly that the economy contracted in the September quarter.
When you're facing that, a massively strengthening currency is really not good news for your manufacturers. In August, Japan clocked a trade deficit far greater than September's measly surplus. The theory is that Japanese bond yields are due to rise given projected stimulus. Japan has by far the highest public debt of the major developed nations.

The Lehman credit swaps were supposed to settle this week, and according to the NY Times, they did. I wanted to close out with something positive!

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