Monday, October 27, 2008

Global Market Rout Continues

Markets around the world tumbled again on Monday as investors shed assets to raise cash to weather the impending global recession.  Emerging-market stocks received yet another beat-down following a difficult week last week.  News of a $16.5 billion IMF loan to the Ukraine and a planned "substantial financial package" for Hungary failed to assuage emerging market equity investors.   
Meanwhile, in the Persian Gulf, Kuwait's central bank guaranteed bank deposits and bailed out one of the country's largest banks.  The Kuwait intervention is the first bank rescue in the Gulf, as even the oil-rich countries face spillover effects from the worldwide financial crisis.  Of course, with oil prices off more than 50% from their peaks, "oil-rich" may soon turn into "oil-middle class." 
Asian markets continued to get slaughtered on Monday, with the Japanese Nikkei dropping 6.4% to a 26-year low.  Hong Kong's stock market dropped 12.7%.  Hong Kong's Financial Secretary John Tsang said that the government had prepared a series of measures that it was ready to implement if needed.  Investors were unimpressed.  South Korea's market rallied 0.8% after the central bank lowered its key interest rate by three-quarters of a point early Monday and South Korea's National Pension Service stepped in to buy shares before the close.
European stocks followed the Asian markets lower, with little positive news to buoy them.  All eyes are on US stock futures, which point to a lower open.  
Meanwhile, the Treasury handed out more cash to US financial institutions adding $7.7 billion to PNC on Friday, aiding its purchase of NCC.  Over the weekend, the Treasury handed over $3.55 billion to Capital One Financial.  KeyCorp announced a $2.5 billion investment from the Treasury this morning.  Huntintgon Bancshares and Suntrust will also receive billions from the Treasury.
With the Fed expected to slash interest rates again, and a slew of earnings reports on the docket, investors should expect another volatile week.  

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