Get Out of Dodge!

Source: CNN

Russian stock exchanges suspended trading for several hours Tuesday after shares plummeted soon after markets opened.

Both exchanges — the main RTS index and the MICEX currency exchange — reopened later in the day, the indices said.

Financial regulators ordered the suspension after the RTS plunged more than 8 percent in the first few minutes of trading. The Federal Financial Markets Service (FFMS) also suspended the MICEX in the first few minutes of trading in anticipation of big losses.

The turmoil in the Russian markets stems from concern over global growth following the recent instability in financial markets around the world.

Source: Bloomberg.com

Money-market rates in Europe jumped to records after the U.S. Congress rejected a $700 billion rescue plan for financial companies, heightening concern more banks will fail, and as lenders hoarded cash as the third quarter ends.

The euro interbank offered rate, or Euribor, that banks charge each other for one-month loans climbed to a record 5.05 percent today, the European Banking Federation said. Rates on three-month loans in dollars were as high as 10 percent as of 10:50 a.m. in London, said Ronald Tharun, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned lender. The dollar Libor-OIS spread, a gauge of the scarcity of cash, advanced to a record. Rates in Asia also rose.

“The money markets have completely broken down, with no trading taking place at all,” said Christoph Rieger, a fixed- income strategist at Dresdner Kleinwort in Frankfurt. “There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.”

Credit markets have seized up, tipping banks toward insolvency and forcing U.S. and European governments to rescue five banks in the past two days, including Dexia SA, the world’s biggest lender to local governments, and Wachovia Corp. Money- market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620 billion. Banks yesterday borrowed the most since 2002 at the ECB’s emergency rate.

Full Story…

perhaps our salvation is indeed at hand…let us pray.

Source: FT.com

Markets were sent into a tailspin on Monday when the House of Representatives shocked investors by voting to reject the Bush administration’s $700bn (€484bn) bail-out plan.

The vote effectively torpedoed unprecedented government interventions to quell the fear in the financial markets which had earlier seen five US and European banks rescued or nationalised and the world’s central banks unleashing a gigantic global liquidity operation.

House Republicans voted roughly two-to-one against the bail-out, while the Democrats split three-to-two in favour. Congressional leaders took procedural steps that could enable a revote, but analysts said Democrats would be unlikely to try again without the promise of more Republican support.

The S&P 500, already heavily down, plunged at one point by 7.2 per cent on the day before recouping some of its losses. However, as the political recriminations began it was down 6.5 per cent in late afternoon trading. Even before the surprise vote, the FTSE 100 had closed down 5.3 per cent on a tumultuous day which saw financial stocks hammered.

Meanwhile, stress in the credit markets, the epicentre of the financial crisis, intensified as investors fled to save government securities. A flight to safety saw the yield on the two-year US Treasury bill fall 38 basis points.

Each side blamed the other for playing partisan politics. The rescue plan has angered many taxpayers, who see it as a bail-out for Wall Street.

Full Story…

Now you KNOW that things are bad, when Google has a bad day…

Source: MarketWatch

Google Inc. saw its once high-flying share price fall under the $400 mark by midday Monday. This represents the lowest price for the stock since September of 2006, when the shares were still on a sharp upward climb following the company’s initial public offering two years before. The Web search giant’s stock peaked near the $750 mark in November of last year before a sharp sell-off in high tech stocks began to pressure the shares. By midday Monday, Google traded as low as $395.34, down 8% from its previous close, following a sharp sell-off in tech stocks as well as the broader market.

Source:  Reuters

The House of Representatives voted on Monday to begin debate on legislation for a financial markets rescue plan, clearing the way for a final vote on the measure later in the day that would send it to the Senate.

The plan would give the Treasury Department up to $700 billion in buying power to acquire mortgage assets from troubled financial institutions.

If the measure passes the House, it will be sent to the Senate for a vote that is expected by Wednesday. The legislation would then go to President George W. Bush for his signature and enactment.

Debate in the House could be prolonged by skeptics of the plan. Rep. Barney Frank, the chairman of the House Financial Services Committee, said he and colleagues face “a tough vote.”

“We regret the market conditions which have made this decision day necessary,” he said, opening debate on the legislation. “No one is happy that we have seen the failures that we have seen.”

Full Story…

Perhaps one day we will look back at recent events and define their significance as the birth of a Global Monetary Authority.

Source: FT.com

Even if the US’s massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets that have become borderless.

Washington recognises that the crisis has become global. Hank Paulson, Treasury secretary, has said that foreign banks operating in the US will be eligible for federal assistance and he is urging other nations to fashion their own bail-out programmes. Central banks have also been synchronising injections of funds into markets. These should be steps to a more comprehensive international response designed not just to extinguish the current fires, but to rebuild and maintain the capital markets for the longer term.

The current global institutional apparatus is woefully incapable of overseeing the financial system that is evolving. The International Monetary Fund is irrelevant to this crisis, the Group of Seven leading industrial countries lacks legitimacy in a world where China, Brazil and others are big players, and the Bank for International Settlement has no operational role. The US Federal Reserve is too besieged to act as a global central bank.

That vacuum at the centre is dangerous for everyone. The US’s dependence on massive inflows of foreign capital, roughly $3bn (€2bn, £1.6bn) a day, will surely increase now as Uncle Sam acquires $1,000bn in new obligations from current bail-outs. For years to come, Wall Street and Washington will be unable to manage without strong co-operation from other markets.

Full Story…