Asian News

[Ichiro]

11aug-Fed May Drop Rates Within Next Week -- Merrill Lynch

"The U.S. Federal Reserve may be forced to perform an emergency inter-meeting rate cut within the next week, according to Merrill Lynch analyst Joseph B. Shatz. Shatz told clients in a Thursday note Fed Funds futures point to a significant possibility that the Fed will drop its target rate from a current 5.25% due to a spat of recent concerns over global liquidity, including a move by the European Central Bank to inject €151 billion into European money markets over the past two days.""

Source: Marketwatch--Today's Wallstreet Breaekfast....

 

[Ichiro]

Yen Gains to Highest Since 2006 as Investors Exit Carry Trades

(((wow, the yen is at 113. Tomorrow, the Nikkei will take a beating...It appears that the FED will not reduce the interest rate--Helicopter BEN will not rescue the financial market...Now, if the China Market crashes, watch out!!!)))

By Min Zeng and Kim-Mai Cutler
Enlarge Image
A monitor displays the activity of the yen

Aug. 16 (Bloomberg) -- The yen rose to the highest since July 2006 versus the dollar as a global rout of stocks and credit markets pushed investors to sell riskier assets funded by loans in Japan.

The yen is the strongest most-actively traded currency today and reached the highest since March versus the euro as the carry trades unwound. Global stocks fell and companies from Australia to Canada sought emergency funds as they were unable to refinance debt. Currencies in New Zealand and Australia led the decline versus the yen, both falling more than 5 percent.

``The market is in panic mode,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York, the world's largest custodian bank with over $20 trillion in assets under administration. ``It is a full-blown unwinding of the carry trade. This is just the beginning.''

The Japanese currency advanced 2.1 percent to 114.21 per dollar at 11:38 a.m. in New York and earlier reached 113.60, the strongest since July 2006. The yen also gained 2.3 percent to 153.07 per euro and touched 151.98, the highest since March.

Japan's yen has rebounded from a record low of 168.99 per euro on July 23, and 124.13 per dollar on June 22, the weakest since December 2002.

http://www.bloomberg.com/apps/news?pid=20601087&sid=adtZAS4LJY8Y&refer=home

 

[Ichiro]

Brazil's Real Tumbles Up to 5.1 %; Treasury Cancels Debt Sale

((Folks, now the Yen is at 112.60 to the US$$. The Brazil's currency falls 5%. I would keep away from the emerging market for the time being.. If the China Market crashes, watch out!!! I just hope it does not turn ugly like the black Monday!!Helipcopter BEN never learns....))

By Adriana Brasileiro

Aug. 16 (Bloomberg) -- Brazil's currency sank as much as 5.1 percent, sending it to a five-month low as a rout in global credit markets prompted investors to dump risky emerging-market assets.

Brazilian bonds also plummeted, pushing up benchmark five- month yields to a three-month high and prompting the Treasury to scrap a weekly debt sale for the second time in three weeks.

The currency dropped to as low as 2.1325 reais per dollar, its weakest rate since March 5. The real was down 4.9 percent at 2.1292 per dollar at 12:39 p.m. New York time. It has plunged 9.6 percent in the past three days and 15.6 percent since July 23, when losses in the U.S. subprime loan market began eroding demand for other risky assets throughout the world.

``All emerging markets are falling because nobody dares to try to assess how deep and how far the damage will be,'' Gordian Kemen, a Latin America strategist at Lehman Brothers Inc., said in an interview. ``Emerging markets are far from the epicenter of this crisis but they offer more risk, and nobody is thinking about going back to risk now.''

The central bank didn't buy dollars in the currency market yesterday and the day before, after purchasing the U.S. currency daily since July last year to build up reserves.

http://www.bloomberg.com/apps/news?pid=20601083&sid=aaHuOBFJcUMs&refer=currency

 

[Ichiro]

Tokyo stocks plunge 5 pct on yen,energy stocks down-Fri Aug 17, 2007 2:07AM EDT

(nikkei drops 5% today. If yen appreciates beyond 113, expect another two to three % drop in the nikkei on Monday... The yen is appreciating very fast these days due to the yen carry trade but has a negative impact on the nikkei.)))

TOKYO, Aug 17 (Reuters) - The Nikkei plummeted more than 5 percent to post its biggest percentage loss in nearly six years on Friday as sharp gains in the yen triggered concern about Japan's economic outlook and profit prospects, pushing down exporters such as Toyota Motor Corp. (7203.T: Quote, Profile, Research).

A dive in commodity prices hit nonferrous metals stocks, trading firms and other energy-related stocks, pulling the broader TOPIX index down to its lowest in nearly 13 months.

http://www.reuters.com/article/marketsNews/idINTFA00285720070817?rpc=44

 

[Ichiro]

Fed Cuts Discount Rate to 5.75 Percent to Ease Credit Crunch

(Finally Helicopter BEN lowers the rates before it is tooo late!!!))

By Scott Lanman and Brendan Murray

Aug. 17 (Bloomberg) -- The Federal Reserve, in an unscheduled announcement, cut its discount rate and said it's prepared to take further actions to ``mitigate'' damage to the economy from the rout in global credit markets.

The central bank reduced the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. It's the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward,'' the central bank's Federal Open Market Committee said in a statement released in Washington. ``The downside risks have increased appreciably.''

In the statement, the committee said it is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aMr45.9VOKes&refer=home

 

[Ichiro]

U.S. Fed's Cuts Discount Rate; Fed Board Statement (Text)

By Alex Tanzi

Aug. 17 (Bloomberg) -- The following is the text from the Federal Reserve's Open Market Committee and the Federal Reserve Board.

Federal Reserve's Open Market Committee

Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Voting in favor of the policy announcement were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; Eric Rosengren; and Kevin M. Warsh.

Federal Reserve Board

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiHUDlIJ1Ga8&refer=home

 

[Ichiro]

China May Raise Rates by Sept. 30 to Cool Growth (Update1)

((I hope this does not crash the Chinese stock market!!))

By Nipa Piboontanasawat and Patricia Chua
Enlarge Image
Zhou Xiaochuan, governor of the People's Bank of China.

Aug. 17 (Bloomberg) -- China will probably raise interest rates by the end of September to cool the economy after inflation accelerated to a 10-year high and record trade surpluses pumped cash into the financial system.

Rates will increase this quarter for the fourth time since March, 11 of 16 economists in a Bloomberg News survey said yesterday after the final economic data for July. Most expect the benchmark one-year lending rate to rise to 7.11 percent from 6.84 percent. The deposit rate is likely to be raised to 3.6 percent from 3.33 percent.

http://www.bloomberg.com/apps/news?pid=20601013&sid=aFQSLlvN3f_A&refer=emergingmarkets

 

[Ichiro]

ECB Should Scrap Plan to Raise Rates, Economists Say (Update2)


((If eCB raises their interest rate, it will crash their stock market.. ))


By Matthew Brockett
Enlarge Image
Jean-Claude Trichet, president of the ECB

Aug. 17 (Bloomberg) -- The European Central Bank should scrap plans to raise interest rates in September after markets around the world plunged, economists said.

``There is a big financial storm brewing,'' said Andrew Bosomworth, a fund manager at Pacific Investment Management Co. in Munich. If companies ``can't finance themselves, we may see bankruptcies. A forward-looking central bank should go on hold.''

Global stock markets tumbled yesterday, sending benchmark indexes in Europe and Asia to the lowest levels in five months, as concern deepened that a credit crunch sparked by the U.S. subprime crisis will curb company earnings and slow economic growth. Investors have pared bets on higher borrowing costs in the 13-nation euro region even after ECB President Jean-Claude Trichet signaled on Aug. 14 the bank remains on track to raise its benchmark rate next month.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a5CthDLKLFuM&refer=economy

 

[Ichiro]

Hong Kong Stocks Will Gain Most From Fed Cut: Michael R. Sesit

By Michael R. Sesit

Enlarge Image
A board displays the Hang Seng Index in Hong Kong

Aug. 17 (Bloomberg) -- The silver lining of a financial crisis is never easy to find. This time, Asian stocks, including Hong Kong shares, may benefit from the Federal Reserve's attempt to deal with the U.S. subprime mortgage debacle.

That is especially so if the Fed lowers official short-term interest rates to prevent the liquidity squeeze and credit crunch from harming U.S. economic growth.

Hong Kong is a special case in point. Because its dollar is pegged to the U.S. currency, the Asian city's monetary policy mirrors its American counterpart. That means whatever steps the Fed takes to stimulate the economy will be an unintended fillip to Hong Kong.

There, however, the similarities end. While U.S. growth has slowed to a 1.8 percent year-over-year rate, Hong Kong's gross domestic product is expanding at a 5.6 percent pace.

The U.S. budget deficit is 3.6 percent of GDP, and its current-account deficit equals 6.4 percent. Hong Kong, by contrast, sports a budget surplus of 1 percent of GDP and a massive current-account surplus equal to 11.4 percent of GDP.
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_sesit&sid=arkm3iytRxeQ

 

[Ichiro]

FEDERAL RESERVE DISCOUNT RATE CUT COMMENT
by David Urban
August 17, 2007

This morning, in a surprise move, the Federal Reserve cut its discount rate by 50 basis points from 6.25% to 5.75% in order to provide additional liquidity and restore normal operations to the discount window. The discount window is used to provide short-term liquidity to financial institutions and provide a source of funds for lending in the federal fund window.

During the recent panic, the Federal Reserve has been injecting the banking system with short-term flows of capital in order to keep the system liquid and functioning properly. The Federal Reserve will take collateral in return but it is the collateral and margin requirements which have been causing the most problems.

The Federal Reserve Board (FRB) noted in the first sentence that this rate cut was temporary so expect an increase or non-cut balancing out a cut in the Fed Funds rate when liquidity improves.

The more interesting points come later in the statement when the FRB notes that they have extended the borrowing term to 30 days, renewable by the borrower. This signals to me that there may be a couple of banks with problems in the system. If so, this provides additional liquidity and gives the banks more time to sort through their problems.

http://www.[[financialsense.com/fsu/editorials/2007/0817.html

 

[Ichiro]

Daily FX-Fed Bails Out Stocks With Rate Cuts, but Dollar May Tumble

((The yen will strenghten in the near future due to the rate cut by Helicopter BEN))
Friday August 17, 2:15 pm ET
By David Rodriguez, Currency Analyst strategist@dailyfx.com

The US dollar traded significantly lower against major trading counterparts, as a surprise Federal Reserve interest rate cut eased risk aversion across financial market. The greenback, which has gained significantly on the recent flight to quality, halved its earlier week gains and sunk below previous two-month highs on a simultaneous Dow rally.


The Euro bounced off of fairly significant technical support, trading as many as 180 points off of lows to $1.3500 at time of writing. Forex traders likewise eased recent British Pound tumbles, with Cable erasing overnight losses to stay at $1.9822. A bounce in the forex carry trade made the Japanese Yen the only major currency to lose against the dollar, with the greenback adding ¥3.00 off of lows to ¥114.44.

http://biz.yahoo.com/fxcm/070817/1187374535376.html?.v=1

 

[Ichiro]

RELIEF IS SPELT B-E-N --by Brady Willett
FallStreet.com
August 17, 2007

((Folks, it looks like the yen is heading below 110 in the near future due to the recent reduction of the discount rate by BEN and also the possibly of the interest rate increase by GOJ in September. Fukui's term as the GOJ is up next March 08. I just hope that the next GOJ is not too conservative....))

Yen carry is blowing up, global stock prices are in mini-crash mode, and the financial meltdown is threatening to spark an economic meltdown. Having gingerly danced with rhetoric and liquidity injections in recent days, the Fed started to boogie this morning. Here is the statement in its entirety:

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

The initial response to this move is, obviously, relief: financial market participants were – literally – screaming for help, and the Fed is now on the job. But after the initial rebound in the markets what will happen in the coming months is considerably less clear. Will today’s actions and any follow up actions be enough to stabilize bearish spirits?

http://www.financialsense.com/editorials/willett/2007/0817.html

 

[Ichiro]

Reuters-Buffett could buy parts of Countrywide: report

((As I stated earlier, Mr. Buffet will be buying these undervalued financial securites next to nothing. Also, Mr. Winters of the Wintergreen Fund is buying these foreign securites at substantial discount. In the long run, they will make big $$$ from buying these beaten up financial companies.))

Monday August 20, 10:42 pm ET

NEW YORK (Reuters) - Billionaire investor Warren Buffett may buy parts of beleaguered mortgage lender Countrywide Financial Corp (NYSE:CFC - News), some investors are speculating, according to The Wall Street Journal.



Countrywide's debt-servicing business and its portfolio of mortgages and mortgage-backed securities may be attractive to Buffett, the Journal reported on its Web site on Monday, citing unnamed investors.

Like many mortgage lenders, Countrywide has struggled with rising delinquencies and foreclosures, and an unwillingness among bankers to extend credit, and among investors to buy the loans it makes.

Countrywide, which is being closely monitored by U.S. regulators, sought to reassure investors earlier on Monday that it is safe to do business with the company.

http://biz.yahoo.com/rb/070820/countrywide_buffett.html?.v=1

 

[Ichiro]

STOCK MARKET GYRATIONS AND THE "YEN CARRY" TRADE
by Gary Dorsch
Editor, Global Money Trends Magazine
August 23, 2007

For long-term buy and hold investors in the US stock market, who simply sit through wild market gyrations, it’s good to know that you have “Plunge Protection Insurance.” The dynamic duo of US Treasury chief Henry Paulson and Federal Reserve chief Ben “B-52” Bernanke are working overtime these days, and using all the weapons in their arsenal to prevent a bear market from materializing, while Wall Street faces its worst financial crisis in many decades.

“I asked Chairman Bernanke if he would use all the tools available to him and he said, Absolutely,” said US Senator Christopher Dodd on Aug 21st, after a meeting with Paulson and Bernanke, the top commanders of the “Plunge Protection Team” (PPT). “Historically the federal funds rate has tended to follow movements in the discount rate,” Dodd added, alluding to the PPT’s most potent weapon.

In today’s world of extreme market volatility and information overload, the memory span of the average hedge fund trader has been reduced to about 24-hours. Yet just two weeks ago, the global stock markets went into a mini meltdown, after BNP Paribas, France’s biggest bank, froze 2 billion euros in three hedge funds it manages, because they contained toxic US sub-prime mortgage debt that couldn’t be sold.

It was the second time that the American sub-prime debt bomb exploded in Europe. Earlier, Germany’s IKB Bank, said it expected to lose a fifth of its 17.5 billion euro ($24 billion) stake in US sub-prime mortgages. To stop IKB from un-raveling, the Bundesbank cobbled together several banks to provide 3.5 billion euros to cover the bank’s losses, and prevented Germany’s biggest banking crisis in 75 years.

In July, Bear Stearns declared that two of its hedge funds that owned toxic US sub-prime slime were headed for bankruptcy. Ahead of the next round of quarterly earnings reports in October, traders are wondering if other banks and investment firms that are exposed to billions of dollars of the toxic sub-prime mortgages, will come clean and show the full extent of their losses.


http://www.[[financialsense.com/fsu/editorials/dorsch/2007/0823.html

 

[Ichiro]

WILL CREDIT CRISIS CALM DOWN
BEFORE THE REAL STOCK CRASH?
by Christopher Laird
PrudentSquirrel.com
August 23, 2007


After basically being up on and off 24/7 for two weeks – I am amazed at the speed of the onset of the credit crisis. I also had a feeling last night, thinking about all this chaos, that it is rather bizarre. Weird and eerie is another view. There is no doubt that we have seen real fear like never since 1929 in credit markets. That almost spread to equities, with some scary drops – like 600 and 800 point down days in the Hang Seng and the Nikkei.

As happened in the February 27 crashes, the US markets were the ones that more or less held ground- So far. As that seemed to continue to be the case, again, the Asian markets seemed to calm, and also the European markets. Now, I would also suggest that the US ‘Working Group on Markets’ and the BOJ market management teams both put serious floors under equities. Many times in the past two weeks we would see the Dow headed for a really bad day, but all of a sudden a serious reversal. I particularly remember that day when the Dow was rapidly down 150 points, but made most of that up in the last hour and ended down something like a few points. You are not going to tell me that the traders really did that one. A floor was put in.

I am not really one of these people who believe in conspiracies, but that does not mean that the Working Group on Markets is not what is seriously mitigating things. Hey, they admit they do it. They certainly have the horsepower and brains to pull it off, with Paulson and so on, market traders par excellence.

The only trouble is, how many times can this work? I think it is rather clear that, now that mortgage derivatives have been scattered world wide, and are being written down to 10 cents on the dollar, some more anarchy must ensue. We may have sort of weathered the first real test, but at great cost, and likely many hidden losses out there. We are not out of the woods yet by any imagination. The bad derivatives are about $2trillion worth of subprime and Alt A (one level higher). 20% of these are in arrears. Then we have the trouble spreading to even good mortgage derivatives, as investors flee these regardless of quality. That has caused jumbo loans (exceeding 400k US) to become hard to get and at 9%! Good luck to the high end real estate market.

Obviously, mortgages are not all going to lose 90% of their value, or are they? Maybe, if we have a real depression, and that is quite possible given the scope of this credit crisis – way larger than the LTCM episode – maybe if we have a real depression most mortgage derivatives will lose 90% value. We are talking something in the range of $10 trillion worth of new mortgages in the last 5 years that are becoming a big weight around all the holders of the paper.

http://www.[[financialsense.com/fsu/editorials/laird/2007/0823.html

 

[Ichiro]

NATOMY OF A BOTTOM
by Puru Saxena
Editor, Money Matters
August 22, 2007


After going through all the technical and sentiment data available, I am more convinced than ever that a major bottom was formed in the markets last week. Below I present the reasons –

a. Volatility Index (VIX) which measures market fear surged to 37 intra-day on Thursday before reversing and settling at 30. On Tuesday, it fell further to 28 - we may have seen the top in the VIX.

b. On Thursday, over 1,000 US stocks recorded fresh 52-week lows and only 10 stocks hit new highs - this extreme reading is a symptom of a severely oversold market

c. The Put/Call ratio, which measures the number of put options (bets on the market declining) versus call options (bets on the market rising) reached 1.3 which is even higher than the level recorded at the bear-market double bottom in October 2002 and March 2003. The current reading indicates that the majority of market participants are positioned for a further fall and not many are betting on a rise. Such a high level of bearishness is a great "bullish" contrarian signal.

d. The latest survey done by Investors Intelligence shows that the level of bullish advisers has shrunk to 43% from close to 60% which is consistent with previous market bottoms

e. The Bank Index in the US (a leading indicator) also bottomed last Thursday and has been leading the advance off the lows

f. The Fed cut the "Discount Rate" by 50% and this is a sign that it will probably cut its Fed Funds Rate at its next meeting. Rate cuts are bullish for assets and negative for the US Dollar.

g. Finally, Thursday marked a "key" day reversal. In other words, after being down significantly during the day on massive volume, US stocks managed to close higher representing panic and capitulation.

http://www.financialsense.com/editorials/saxena/2007/0822.html

 

[Ichiro]

Reuters
Bank of China's subprime exposure rattles Asia
Friday August 24, 9:09 am ET
By Mike Peacock and Jan Dahinten

LONDON/SINGAPORE (Reuters) - Three Asian banks' heavy exposure to the limping U.S. home loan sector reinforced global credit wobbles on Friday but Germany, France and Italy saw no signs of new problems.


Shares in Singapore's DBS Group Holdings (SESBSM.SI - News), state-controlled Bank of China (HKSE:3988.HK - News) and its Hong Kong subsidiary, BOC Hong Kong (HKSE:2388.HK - News), all dived after they revealed a combined exposure to the U.S. subprime mortgage market of almost $13 billion. (nHKG273224)

The news raised fears that Asian banks, generally risk averse following the Asian financial crisis 10 years ago, were more vulnerable to the crisis than investors had thought.

Stock markets from Sydney to Seoul fell in response, handing Asia its first losing session since a major drop last Friday.

European stocks followed suit and U.S. stock futures pointed to a lower open on Wall Street as rising confidence was brought up short by Countrywide Financial (NYSE:CFC - News) chief Angelo Mozilo's assessment the United States could be dragged into recession.

Japan's top financial diplomat tried to pour oil on troubled waters, saying the worst of the market adjustment was over, although it would linger for some time, and there was no wider economic danger.

"(Volatile markets) should not negatively affect the economy," Naoyuki Shinohara, vice finance minister for international affairs, told reporters.

EUROPE MORE POSITIVE

French Economy Minster Christine Lagarde was also upbeat, saying France's banks faced no substantial risks from exposure to subprime loans. "The situation in the banking sector is absolutely healthy," she told a news conference.

In France, BNP Paribas (Paris:BNPP.PA - News) said it would reopen next week three investment funds frozen this month because U.S. subprime market volatility meant it could not value some assets.

German Finance Minister Peer Steinbrueck was equally sanguine. He said there was no evidence his country's banks faced further problems, or that the liquidity crisis was wreaking wider economic damage.

http://biz.yahoo.com/rb/070824/economy_credit.html?.v=3

 

[Ichiro]

Dollar May Fall to Record Within Six Months, Goldman Sachs Says

By Ye Xie
Enlarge Image/Details

Aug. 24 (Bloomberg) -- The dollar may decline to a record low against the euro in the next six months because U.S. economic growth will slow, forcing the Federal Reserve to cut interest rates, according to Goldman Sachs Group Inc.

From the current level of $1.3568 per euro, the U.S. currency will weaken to $1.43 per euro in the next three to six months, Goldman Sachs said in a research note yesterday. New York-based Goldman, the world's biggest securities firm by market value, lowered its dollar forecast from a prior estimate of $1.35. The dollar set a record low of $1.3852 per euro on July 24.

Concern about losses in investments related to mortgage securities has bolstered expectations the Fed will cut its benchmark interest rate from 5.25 percent at its Sept. 18 policy meeting. Traders are certain the Fed will cut its key rate to at least 5 percent by Sept. 18, futures show.
D
``Financial conditions are tightening at a time when clearly there's some downside risk to the growth,'' said Jens Nordvig, a senior currency strategist at Goldman Sachs in New York. Fed rate cuts ``will drag the dollar lower.''


http://www.bloomberg.com/apps/news?pid=20601083&sid=aGU1K0tcAeQI&refer=currency

 

[Ichiro]

Bank of China Shares Fall in Hong Kong on Subprime (Update6)

By Luo Jun
More Photos/Details

Aug. 24 (Bloomberg) -- Bank of China Ltd. had its biggest drop since going public last year after the nation's second- biggest bank said it holds almost $9.7 billion of securities backed by U.S. subprime loans, the most of any Asian company.

The 5.4 percent decline in Hong Kong erased $10 billion of Beijing-based Bank of China's market value. Almost 1.5 billion shares were traded, more than four times the daily average over the previous six months.

``Bank of China disclosed numbers that no stockholders wanted to hear,'' Warren Blight, a Hong Kong-based analyst at Fox-Pitt Kelton (Asia) Ltd., said in a research note today. ``The market is likely to be very surprised by the scale of the exposure.''

The collapse in securities backed by subprime mortgages has caused losses at lenders around the world, helping send Asian banking stocks lower in the past month. Industrial & Commercial Bank of China Ltd., the world's largest bank by market value, said yesterday it had $1.2 billion of subprime-related securities.

Defaults on home loans to people with poor credit have prompted a sell-off of debt-backed securities that spread to wider credit markets and wiped more than $5.5 trillion off the value of equities worldwide.

Losses related to subprime loans damped enthusiasm for Bank of China even after it reported a 51 percent increase in first- half profit. The shares have fallen 10 percent in Hong Kong this year, the fourth-worst performance among companies on the benchmark Hang Seng index.

http://www.bloomberg.com/apps/news?pid=20601013&sid=ai2vazmTzqvY&refer=emergingmarkets

 

[Ichiro]

Japanese Recession Risk Leaves Goldman Wondering: William Pesek

By William Pesek

More Photos/Details

Aug. 24 (Bloomberg) -- Here we go again!

That's likely to be a common reaction as investment banks such as Goldman Sachs Group Inc. wonder aloud about the risk of a Japanese recession. If the world's second-biggest economy grinds to a halt, it will be no small blow to a financial system that has gotten used to flying on several engines, not just the U.S.

The good news is that the odds don't favor that happening. ``It is too early to conclude that a recession is inevitable,'' Naoki Murakami, an economist at Goldman Sachs Japan Ltd., wrote in an Aug. 22 note to clients.

Such statements aren't as reassuring as investors might hope amid so many global challenges. The meltdown in the U.S. subprime-mortgage market hasn't just sent the yen soaring, but raised big questions about the health of the U.S. economy.

Japan's recovery is solid enough to withstand swings in global mark

http://www.bloomberg.com/apps/news?pid=20601039&sid=ahsH0SqcUUVM&refer=columnist_pesek