FX Overnight Briefing

Financial News - US & Far East

• U.S. stocks fell
• Oil below 49 USD
• BoJ kept rates unchanged at 0,30 %
• Nikkei turned around to positive, at the end

Today's Main Events

• DEM: PMI
• EUR: PMI
• EUR: Gonzalez-Paramo & Nowoltny speaks
• USD: Lacker, Evans & Plosser speaks

American Timezone:

U.S. stocks fell

U.S. stocks slid and the Standard & Poor's 500 Index plunged to its lowest level in 11 years after economic reports depicted a deepening recession and lawmakers postponed a vote on a plan to salvage the auto industry.

The Standard & Poor's 500 Index extended its 2008 tumble to 49 %, poised for the worst annual decline in its 80-year history.

Chesapeake Energy Corp. and National-Oilwell Varco Inc. slid more than 21 % as crude sank to a three-year low as the economic slump crushes demand. JPMorgan Chase & Co. tumbled 18 % and Citigroup Inc. plunged 26 % as concern the recession will trigger more bankruptcies pushed the cost of insurance against corporate defaults to an all-time high.

The S&P 500 slid 6.7 % to 752.58, under the low of 776.76 reached during the bear market in 2002. The Dow Jones Industrial Average sank 443.8 points, or 5.6 %, to 7,553.48. The Nasdaq Composite decreased 5 % to 1,317.05.

JPY higher

The yen touched a three-week high against the dollar and the euro as reports showing a surge in U.S. jobless claims and a drop in manufacturing prompted bets investors will sell higher-yielding assets. The Swiss franc fell to the lowest against the dollar since July 2007 after the central bank unexpectedly halved its target lending rate to 1 %.

Oil below USD 50

Crude oil fell below USD 50 a barrel in New York for the first time in almost two years as a recession in the U.S., Europe and Japan cut global energy demand.

Far East Timezone:

BOJ kept rates unchanged, tweaks market operations

The Bank of Japan kept its key policy rate unchanged at 0.30 % on Friday, as it examines how last month's rate cut helped ease the pain from the global credit crisis.

Eyeing end-of-year pressures in financial markets, the central bank also said it would buy commercial paper more flexibly under repurchase agreements to aid corporate financing and would consider changes in fund operations that are collateralised with corporate debt.

Oil fell USD 1 to below USD 49 on more demand distress

Oil tumbled to a three-and-a-half year low below USD 49 a barrel on Friday, nearing a USD 100 drop from its July record high, as more distress for the global economy threatened to eat further into demand for fuels.

Asian stock markets dropped to a five-year low on Friday, tracking U.S. stocks that hit their lowest in a decade the previous session as the fate of the country's major car makers continued to hang in the balance.

U.S. light crude for January delivery fell USD 1.02 to USD 48.40 a barrel at 0209 GMT, its sixth straight session of falls and a 14 % drop for this week alone, heading for the largest weekly fall since early October. London Brent crude shed 68 cents to USD 47.40 a barrel.

Citigroup slid; eyes options including merger

Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual investor. The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 % this week, a person familiar with the matter said on Thursday. Discussions so far have been internal, and some options --such as entering into a merger where other executives end up running the company -- are unpalatable to managers at Citigroup, the person said. The bank's board of directors is set to meet on Friday, and Morgan Stanley MS.N is not considering a possible bid, the Wall Street Journal reported.

Citigroup did not comment on the report, repeating that it has a 'very strong capital and liquidity position' and is focused on a strategy that will generate benefits 'over time.' Morgan Stanley did not immediately return a call for comment.

Asia stocks at 5-yr low; world economy buckles

Waves of selling in world stock markets crashed into Asia on Friday, with gains from the region's 5-year bull run now erased as a global recession tightened its grip, and investors sought refuge in government bonds and cash. U.S. stocks were at the lowest in more than a decade and oil prices fell to 3-1/2-year lows, trading below USD 50 a barrel, as commodity prices slumped on expectations of reduced demand as economies from the euro zone to Taiwan contract.

The fate of U.S. corporate titans like General Motors, Ford Motor Company and Citigroup was uncertain, adding to a general mood of anxiety. Citigroup, not long ago the world's most valuable financial firm, was reportedly considering selling itself.

Democratic congressional leaders demanded executives at the Big Three automakers come up with a detailed business survival plan in exchange for their support of up to USD 25 billion in loans.

Japan's Nikkei share average dropped 2.2 % up to lunch break, extending its weekly decline to around 12 %. After the break Nikkei turned around and at 04.30 GMT it was up 1 %.

Jyske Markets - FX Research
http://www.jyskebank.dk/finansnyt

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