Got this this morning from my FX guy
It's good we had a weekend because we are in for another long week. GLOBAL
(see below) financial crisis continues and FX is all over the place.
Dollar had significant gains overnight but is giving some of it back.
Equities are tanking once again but the good news is oil is back below
$100. Is it Friday yet?
(See attached file: Fx Rates.xls)
Foreign Exchange Portland, Monday, September 29, 2008 (6:10 am PDT)
EUR 1.4382 JPY 105.47 GBP 1. 8058 CAD 1.0336 AUD .8134
MXN 10.9489 CNY 6.8183
Rates are wholesale interbank indications for multi-million dollar
transactions
And Now the Other Shoe
Lending institutions receiving government supported credit amid fears of
collapse, a couple more banks being taken over, share prices of a major
bank dropping 22% and another dropping 20%. Sound all too familiar for
a Monday? Except that this is on the other side of the Atlantic.
Germany?s Hypo Real Estate received a credit facility, Dutch, Belgian
and Luxembourg governments nationalized parts of Fortis financial group
injecting EUR 11.2B, lending institution Bradford and Bingley was
nationalized by the British Government, Iceland?s 3rd largest bank was
nationalized and German Commerzbank and the French Natixis groups saw
their shares plummet 22% and 20% respectively. Globally equities are not
amused and the US market is off to a 2.5% drop in various indices.
In the FX world these events tended to overshadow progress on the US?s
own bailout plan as well as the news that Citi Bank is taking over
Wachovia. The dollar is up substantially across the board except for
safe haven JPY and is flat with our friends to the north. Dollar gained
2.5 cents on the EUR and nearly 4 cents on the GBP. AUD and NZD also
fell a penny or more. Near term targets from a technical view are
1.4260 on the EUR and 1.7880 on the GBP. The House vote on the bailout
package later in the day will give some fresh insight into future moves.
So what is it with the European banks? They are not necessarily as
unsound as some of the American banks that have gone under. But what is
coming into play is the contagion effect. For those of you who remember
It?s a Wonderful Life there is the scene where there is a run on Baileys
Savings and Loan and George is telling folks who want to withdraw their
savings that it is not cash in the vault, it is in so and so?s home or
so and so?s business. Banks are all intertwined in a similar way so
despite what the ECB liked to think, European banks are not immune to
the US crisis. And while the US has worked on a plan for a bailout one
has to figure that in addition to the ECB trying to do things we have 15
central banks and 15 governments that will be looking out for their own
interest as well.
The Citi-Wachovia news was not unexpected as it was being discussed as a
foregone conclusion last Friday. Cit will acquire the bulk of
Wachovia?s assets and liabilities in a deal that will see the government
backstop any losses beyond $42B on bank?s $312B pool of loans.
Meanwhile there is our own rescue package that hits the House today and
the Senate on Wed. Irate phone calls are coming into Rep.?s and Sen.?s
offices from angry constituents. I am never one to give our elected
officials any credit for intelligence or insight above and beyond that
of the average voter. However, in this situation I do believe that
most folks are seeing only one side of the equation, that $700B of their
tax dollars are going down the toilet, and while rightfully ticked off
that we are cleaning up the excesses of a few, we still need to look
ahead. As someone stated so well, this is not a bailout of banks but of
trying to protect the finances of businesses small and large and the
individual and to build a sounder future.
At 7:20PDT, Nikkei -1.26%, Singapore -2.08%, London FTSE -5.09%, CAC
Paris -3.72%,
Frankfurt DAX -3.37%, Toronto -3.81%, NASDAQ -3.94%, Dow 2.39%, 30-year
Bond 4.22%,
Gold 894.20, WTI Oil 100.08, Prime rate 5.00%, US one-month LIBOR 3.72%,
three month 3.8825%
