World markets steadied overnight after major central banks revealed huge large-scale emergency $US180 billion injections of dollar liquidity in an attempt to halt the global financial market crisis.
Wall Street finished up strongly with the S&P 500 up over 4%; oil rose to $US102 a barrel, then fell back to $US96, gold jumped again to close to $US900 an ounce, European markets were down, but not out and confidence seemed to be a little stronger than on Wednesday.
Reports circulated of a new US Government funds to buy distressed assets and even shares.
And the pressure on interest rates eased as the flood of cash out of the stockmarket eased: US 10 year bond yields edged up to $3.54%, a small but welcome rise.
Helping was the central bank move.In total $US180 billion in new facilities, with another $US110 billion being created by some of the non-US central banks.
And the UK financial regulator cracked down on short selling of financial stocks, following the US SEC the day before. And there was talk of some sort of Government ‘solution’ whatever that means.
The Fed and the ECB will make big injections of cash on a daily basis until further notice.
The announcement, timed at 3 am East Coast US time yesterday morning on the US Federal Reserve’s website revealed the largest direct, coordinated intervention so far. That put the announcement right into the start of European trading.
Besides the Fed the other central banks were the bank of Japan, The European Central bank, the Bank of Canada, the Bank of England and the Swiss National bank; all of whom were involved in similar, but smaller coordinated injections on liquidity over the past year.
But nothing as large as this.
And, important for us here, Australia wasn’t involved.
Our Reserve bank has pumped more than $A11 billion into our markets this week so far to keep liquidity levels high, but that has been of the RBA’s own estimation, not part of a wider effort.
It has injected funds; the Bank of Japan was doing something similar, but the moves haven’t been coordinated.
The RBA pumped in $A3 billion yesterday while the banks boosted the amount they kept in the Exchange Settlement Account with the RBA overnight to more than $A6 billion, in case there were problems overnight.
That’s because Australia doesn’t need a coordinated approach designed to boost the supply of US dollars to keep the markets liquid, especially in Europe.
The central banks involved in the coordinated move said they would “continue to work closely together and will take appropriate steps to address the ongoing pressures.”
The funding remains in place until well after January 1, 2009.
Asian stock markets regained much of their losses on Thursday as news of the intervention by the six central banks spread across the region.
The ECB and the Bank of England did larger than expected auctions of cash in the morning overnight to ram home the point that there was enough money available to meet all needs.
In Hong Kong, the Hang Seng closed 0.03% lower at 17632, 46 after first appearing to have closed in positive territory. Earlier in the day the index fell much as 7.7% after fears grew that there would be losers after the $US85 billion dollar bailout of AIG.
The Russian market traded fitfully last night after freezing the day before and trading being suspended on the stockmarket. There was limited trading yesterday but full trading is due to resume tonight, our time.
The authorities are pumping in billions of dollars today into the markets (share and credit) to try and maintain stability when dealings start tonight, our time
Lloyds TSB and HBOS completed the preliminaries on their merger/takeover, despite criticism from some HBOS shareholders. They didn’t understand the option was nothing, or something.
News of the central bank move broke about half an hour before equity trading finished in Hong Kong and the Hang Seng surged by nearly four per cent in just over 20 minutes.
Last night the Chinese Government revealed plans to scrap stamp duty on share deals to help boost confidence levels among investors.
Markets in Australia, Japan and China missed the impact.
The central bank moves came too late for Australia where Macquarie Bank was hammered, closing down 23%
The Nikkei ended 2.2% in Tokyo at a 27-month closing low of 11,489.30, after earlier dropping as much as 3.8$; In China, the Shanghai composite index closed 1.7% lower at 1,895.84.
In Australia, the ASX 200 index closed 2.4% down at 4,607.30. But Australia had been down more early in the day.
Losses also quickly narrowed elsewhere in Asia and in Europe, markets opened stronger and US futures reversed an easier tone to rise.
Vulnerable HBOS was rescued, and attention in the US was on the fates of Morgan Stanley, which was reportedly talking to several groups, including Wachovia and HSBC and Washington Mutual, the big savings and Loan, which may receive an offer later today.
Now there’s talk Morgan Stanley is talking to a Chinese sovereign wealth fund about selling a 49% stake. Morgan shares were sold off sharply overnight, while Goldman Sachs shares were also sold down.
The ECB said in its announcement that it would expand its armoury by offering “for as long as needed” $US 40 billion in overnight funds to eurozone banks.
The Bank of England moved to add additional funds into the stressed sterling markets, announcing that it would renew the 25 billion pounds (around $US35 billion) it loaned the banking sector earlier this week for another seven days and
