Oh how it all turns around, and how quickly.
World markets have soared overnight; the Australian dollar has surged against the yen and the US dollar and our market is forecast to jump sharply this morning.
The Standard & Poor’s 500 Index jumped 91.56 points, or 10.79%, to 940.48 after sliding to the lowest level since March 2003 yesterday.
The Dow surged 889.35 points, or 10.88%, to 9,065.12 and the Nasdaq finished up 9.53%, or more than 140 points. Hong Kong’s benchmark index added 14%, its best advance in 11 years, while Germany’s climbed 11% and struggling Brazil’s jumped 13%.
London was up less than 2%: the surge in Germany was due to a sharp rise in the shares of Volkswagen as Porsche surprised the market by revealing it had assembled a controlling 7%% by market buying and playing the derivatives markets.
Hedge funds lost heavily as they had been shorting VW shares and got trapped as the value of the shares soared to the point where the car maker was the most highly valued company in the world a
The overnight futures market was signalling a 6% rise in the ASX 200, or more than 240 points..
That was after one of the most explosive last couple of hours trading ever seen on Wall Street. Therre was a gain of 500-600 points in the last hour.
The Dow posted its second-best point gain ever as the cheapest valuations in 23 years lured investors and increased commercial paper sales signaled credit markets are thawing.
In addition, there’s now a belief the Fed will announce a 0.50% rate cut after its current meeting ends tomorrow morning, our time.
The yen fell the most against the dollar since 1974 and posted its biggest decline versus the euro ever as global stocks rallied and speculation increased that the Bank of Japan will cut interest rates.
There were reports in Tokyo overnight of a plans to cut the key rate 0.25%, which would halve the Bank of Japan’s key rate. The central bank meets Friday in Tokyo.
That saw the yen crash, suffering its biggest loss against the greenback since 1974. It dropped 5% against the US currency in New York. It dropped 11% to 62.70 yen against the Aussie and 10.% to 55.19 against the New Zealand dollar.
The Aussie surged 7% to 64.28 US cents after touching 60.09 cents yesterday, the weakest level since April 2003.
The Reserve Bank of Australia bought dollars for a third day yesterday to stem losses and is now sitting on some nice profits as some of the first day’s intervention Friday night was around 55 Yen..
Sales of longer-term commercial paper soared 10-fold after the fed revealed that two days of backing the slumping US corporate commercial paper market, had revitalised it.
The Fed began buying the corporate paper and on Monday alone the market saw companies yesterday sold 1,511 issues totaling a record $US67.1 billion of the debt due in more than 80 days.
That compared with a daily average of 340 issues valued at $US6.7 billion last week. Dealers said the Fed accounted for $US60 billion of the total.
The Dow’s only larger point gain in a day was on October 13, when the 30-stock gauge jumped 936 points on the government’s plan to buy stakes in banks. We know it plunged several times after that, so this could be a one day wonder.
Now for the Fed’s rate cut, but as that is priced in, will markets fall again?
