NEWS / Foreign Exchange

Stocks drops on subprime worries

Overnight News Bullets

• SW Budget Balance (Oct), out at 1.2B vs. 19.4B prior.??

• NO Industrial Production MoM/YoY (Sep), out at -0.2/0.3% vs. -0.1%/-0.6% prior.

• NO Ind Prod Manufacturing MoM/YoY (Sep), out at -0.1%/4.0% vs. 0.3%/4.6% exp. 0.2%/4.2% prior.

• GE Industrial Production MoM/YoY (Sep), out at 0.3%/6.0% vs. -0.5%/5.1% exp. 1.7%/5.1% prior.

• US MBA Mortgage Applications (Nov 2), out at -1.6% vs. 3.8% prior.

• US Nonfarm Productivity (3Q P), out at 4.9 vs. 3.2% exp. 2.6% prior.

• US Unit Labor Costs (3Q P), out at -0.2% vs. 1.0% exp. 1.4% prior.

• US Wholesale Inventories (Sep), out at 0.8% vs. 0.2% exp. 0.1% prior.

• US DOE Crude Oil Inventories (Nov 2), out at -821K vs. -1500K exp. -3894K prior.

• US Consumer Credit (Sep), out at $3.7B vs. $9.0B exp. $12.2B prior.

• NZ Unemployment Rate (3Q), out at 3.5% vs. 3.6% exp. 3.6% prior.

• NZ Employment Change QoQ/YoY (3Q), out at -0.3%/1.5% vs. 0.4%/2.3% exp. 0.7%/1.5%

• JN Machine Orders MoM/YoY (Sep), out at -7.6%/-7.0% vs. -1.5%/-0.9% exp. -7.7%/-2.6% prior.

• JN Net Stocks Investment (Nov 2), out at Y202.2B vs. Y45.6B prior.

• JN Net Bonds Investment (Nov 2), out at Y288.0B vs. Y740.3B prior.

• JN Money Supply YoY (Oct), out at 2.0% vs. 1.7% exp. 1.7% prior.

• JN Broad Liquidity YoY (Oct), out at 3.6% vs. 4.1% exp. 4.1% prior.

• AU Employment Change (Oct), out at 12.9K vs. 20.0K exp. 13.0K prior.

• AU Unemployment Rate (Oct), out at 4.3% vs. 4.2% exp. 4.2% prior.

• AU Participation Rate (Oct), out at unchanged at 65.0% as expected

• JN Machine Tool Orders YoY (Oct P), out at 16.1% vs. 16.3% prior

• SZ Unemployment Rate (Oct), out at 2.6% vs. 2.5% exp. 2.5% prior.

Markets

• FX: Dollar weakness continues after comments from a Chinese official. Cable over 2.10, EURUSD toying with 1.47 and USDJPY briefly at 112.00.

• Fixed Income: US Treasuries rise for a second day after stocks take a hit. JGBs extend 3-day gains and European bonds gain for a second day.

• Stocks: Global equities broadly lower on credit concerns with Asian stocks at 12-wks lows.

• Commodities: Crude corrects lightly with precious metals trading in sideways after 5-days of massive gains.

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Today's Highlights:

This and Next Week??™s Highlights:

What's going on?

• Dollar weakness was taken to next level after a Chinese official stated the country would diversify its $1.43T in foreign reserves. Cable was at a 26-yr high, touching $2.1072.

• Nearly all indices in Asia, North America and Europe closed lower as credit related problems continue to expand. Asian stocks fell the most in 12-wk period, with Shanghai down about 4.85%.

• Morgan Stanley, second largest US securities firm joins Merrill and Citigroup in booking losses on subprime related mortgage losses. Morgan announced it had lost $3.7B in 2 months through Oct. 31.

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