First of all welcome to the first edition of the While you were sleeping series. It is intended to have the most impact for European readers. But I cannot start today without mentioning the terrible morning our investor friends from Asia must have had.
They had to wake up to:
– European Banking sector stocks getting hammered like is 2008. BEBANKS (Bloomberg Europe 500 Banks And Financial Services Index) dropped by 5.6%. The worst performers were: RBS -12.3%, Deutsche Bank -8.9%, Societe Generale -8.6%, ING Bank -8.53%, Credit Suisse -8.1% and Unicredit -7.3%.
– To make matters worse Mr.Ackermann CEO of Deutsche Bank had a very chilling speech about European banks and the EURO. A lot was said but this is what I boils down to his view: “Prospects for the financial sector overall… are rather limited.
– All major European stock indexes down: CAC 40France -4.73%, Eurofirst 300Europe -4.06% , FTSE 100United Kingdom -3.58%, DAXGermany -5.28%.
– Finally the EURO has moved below 1.41 against the dollar ( I still favor strong dollar going forward).
With US Market closed and no good news in sight the Asian markets could only deliver this: Nikkei 225 -1.73%, Hang Seng -0.94%, S&P/ASX 200 -1.40%, Shanghai Composite -0.08%.
However, in the midst of all this volatility Reserve Bank of Australia left interest rates unchanged (statement here). While admitting that it cannot make much sense of current economic environment RBA still believes that “Beyond the near term, growth is still likely to be at trend or higher, unless the world economic outlook continues to deteriorate.” From my two cents RBA is playing with fire a little bit as the previous tightening have brought the economy to almost a halt and by its own words”Most financial indicators suggest that monetary policy has been exerting a degree of restraint. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal. “ Not the way you would like to enter a global slow down. Furthermore, it does not seem to me that they are signalling a cut so more strengthening pressure for the Australian dollar (AUD).