Global Markets

Global Markets: US market was closed for Labour Day Holiday on Mon. All eyes have now turned to the Obama’s speech on Thurs, where he is expected to unveil new infrastructure spending and an extension of the payrolls tax as part of a major jobs package. However, his proposals are expected to face stiff resistance from Republican-controlled Congress. DJ Futures are currently down 268 pts or -2.5%.

European bourses tumbled over 4% with bank stocks hit particularly hard over eurozone debt and the risk of recession.

UK’s FTSE-100 dropped 3.6%, France’s CAC fell 4.7% and Germany’s DAX pluanged 5.3% to a 2-year low. Greek and Italian bonds fell as credit default swaps rose sharply. The euro crumbled below US$1.41 during the trading session while gold jumped above US$1,900/oz, owing to its safe haven status.

The head of ECB Jean-Claude Trichet urged an immediate need for a 2nd debt rescue for Greece and for tightened discipline in the eurozone economies while IMF chief Christine Lagarde repeated her warning that European banks need extra capital to withstand possible debt contagion.

The weakness in bank stocks was exacerbated by the US$200b US lawsuit against 17 leading int’l banks over the misselling of mortgage backed securities, the dreaded sub-prime loans at the heart of the 2008 financial crisis. The foreign banks targeted include Deutsche Bank, HSBC, Credit Suisse, Barclays, RBS, SocGen and Nomura. ECB data also showed record overnight funds, indicating that eurzone banks are reluctant to participate in the interbank market.

The European Bank Debacle
RBS -12.3%
Lloyds -7.5%
Barclays -6.7%
SocGen -8.6%
BNP -6.3%
Deutsche Bank -8.9%
UniCredit -7.3%
Credit Suisse -8.3%
UBS -6.5%
Santander -5.9%