Risk Appetite Recovers in Asia

- Summary of trade between 17:00 ET and 23:00 ET: Bargain hunting on selective stocks pushed Asian stocks higher (a continuation of the cash funneling into defensive names we saw in afternoon trading on Wall Street). The JPY had a choppy session due to the recovering risk appetite, while expectations of more interest rate hikes supported AUD/USD above 0.92. Spot gold had a decent rebound from session lows, but markets remain nervous given huge long positions that are still in place. There were no major economic releases for markets to digest.

- The consensus is that today's commentary from the Fed's Mishkin shows that the Fed intends to leave interest rates unchanged at their December meeting. According to Mishkin, the Fed cut interest rates because the "potential costs of inaction outweighed the benefits". Mishkin said that the Fed's job is to limit damage to the wider U.S. economy. "Policies to achieve this goal are designed to help Main Street and not to bail out Wall Street," he said. "But this does not mean that market participants who have been overly optimistic about their assessment of risk don't pay a high price for their mistakes." Mishkin said that it's possible that the Fed has gone too far and that lower rates could fuel inflation in the coming months, so policymakers need to be flexible enough to reverse course quickly.

- George Soros said that the U.S. economy is "on the verge of a very serious economic correction". Soros said that "we have borrowed an awful lot of money and now the bill is coming to us." Soros did not comment on currencies.

- Equities: At 22:42 ET the Nikkei is +0.22%, Australia's ASX is +0.99% and South Korea's KOSPI is higher by more than +0.50%. Earnings speculation lifted Japanese shipping companies, and bargain hunting among financials provided upside for the Nikkei. But the firming JPY put some pressure on Japanese exporters, limiting the Nikkei's recovery. Observers continue to suggest Aussie financials remain well insulated from the turmoil in U.S. credit markets, providing confidence for bargain hunters to step in. Commodity-related shares in Australia traded mixed after Merrill Lynch cut the Australian Resources Sector to "underweight". Technology shares provided much of the upside on the KOSPI. Heavy profit-taking after PetroChina's successful IPO dragged China's benchmark index lower, and Hong Kong's Hang Seng index tracked losses on the mainland. Shares of Alibaba.com rose by more than 100% on its first day of trading.

- Commodities: Crude oil gained 0.73% between 18:00 ET and 22:53 ET, last quoted at $94.63/bbl. According to news reports, Saudi Arabia plans to cut the official selling prices of all types of oil products that it exports to the United States. Spot gold recovered some early losses, gaining +0.05% to trade at $811.20/oz. According to the China Gold Association, China's gold production is expected to rise by 8% y/y in 2007 to 260 metrics tons and this would make China the world's second largest gold producer. Shanghai Copper is marginally higher on strike concerns related to Peru.

(by Eben Esterhuizen and Gavin Pierce)