It is a sea of red today – we are down 168 or 3.5% but have had a good bounce after being down as much as 267 early on. Wall Street saw a massive 777 point fall overnight after Congress unexpectedly failed to pass the $US700bn Stabilisation Bill. All sectors getting canned – Resources down 5.7%, Financials down 3.6%, Property down 2.4% and Energy is 4.7% lower.

Dow down 777. Bloodbath all session. Closed on its low. Worst one-day fall in 21 years as Congress rejected the US$700bn stabilization bill. Wachovia failed and was bought by Citi. More European banks are failing. The US Fed made a further unprecedented foray into the global money markets increasing liquidity in coordination with nine other central banks – the Fed doubled their swap authorization limit to $620bn to get money flowing between the world’s major commercial banks. Resources fell hard for fear of a significant global slowdown. Metals all down heavily. There was a massive flight to the safety of US Treasury bills and gold. Credit spreads are at extreme highs and are crippling the financial system, the TED spread (The Euro Dollar spread – or the difference in the rates between the Libor and the 3-month US Treasury Bill) spiked 63bps to 3.55% – this is at its highest level since 1984 – and it won’t get any better until the US government stabilises the financial system.

European financials are failing: Bradford & Bingly was nationalized yesterday and Germany‘s Hypo Real Estate was also rescued by a consortium. Fortis, the largest Belgian financial services firm also failed yesterday and was nationalized with 11.2bn-euro spread across three governments – Belgium, the Netherlands and Luxembourg. Iceland’s government took over Glitnir Bank – the country’s third largest. The French-Belgian lender Dexia is being closely watched by analysts with huge losses in its US operations.

Here are a few statistics – The NASDAQ and the S&P 500 had their biggest one-day falls since Black Monday in 1987. The S&P 500 is down 14% so far in September, its worst month since the collapse of hedge fund Long Term Capital Management 10 years ago. The index has fallen to its lowest level since October 2004. The MSCI World Index of 23 developed markets fell 6.9%, the most in 21 years. The NASDAQ fell 9.1%, its biggest percentage fall since April 2000. The S&P 500 Financials index fell 16%, its biggest fall since the index was created in 1989. It was the Dow Jones biggest percentage fall since 9/11.

  • Metals all down overnight – Copper down 5.15%, Zinc down 4.48% and Nickel down 3.64%. Aluminium down 1.97%.
  • Oil price down $10.49 to $96.29 after the US financial bailout plan failed to win legislative approval. The price of oil has fallen 20% in the past week.
  • Gold up $5.90 to $894.40
  • Bonds up with the 10 year yield down to 3.58%.

Both BHP and RIO are down hard after falling 14.2% and 16.4% respectively in ADR form. Both fell 10% in the UK. BHP down 6.8% to 3191c and RIO down 8% to 8790c. RIO now trading over $20 below BHP’s 3.4-for-1 takeover offer…get the feeling no one really cares about that at the moment.

Big 4 Banks are doing OK considering the SFE Futures suggested a 7% fall in the market this morning. ANZ outperforming – down 3.3%, Westpac Bank down 3.8% to 2226c, CBA down 4% to 4212c and NAB down 5.6% to 2427c.

Property Trusts struggling – Dexus Property Group (DXS) has broken even but the rest have gone south. GMG down 7.2% to 245c, Westfield down 1.6% to 1702c and Stockland down 3% to 543c.

In other news…

  • Toll Holdings (TOL) has had its target price to 750c from 780c by JP Morgan saying more couriers are experiencing sales declines rather than growth and that it’s “wishful thinking” to believe otherwise. TOL down 13c to 696c.
  • Babcock & Brown (BNB) down 30% to 166c on back of the US bailout package not been passed overnight. Deteriorating financial markets make it all that more difficult to sell assets at acceptable prices.
  • Credit Suisse maintain their OUTPERFORM recommendation on OneSteel (OST) after it announced their acquisition of Steel & Tube Holdings. They have a 900c target price saying, “The primary drivers for the deal are clearly not about synergy benefits nor operational control”. OST down 7% this morning.
  • According to the AFR, APRA was warned the banks about disclosing their loan exposures to financial companies and their listed funds on the back of the financial crisis. Talk is that the CBA will meet with APRA and that the NAB has undertaken at look at its lending practices.
  • Macquarie Infrastructure Group (MIG) has agreed to sell its 30.6% interest in Lusoponte for $201m, the Portuguese tollbridge operator. Down 1.75%.
  • SP AusNet (SPN) unchanged after signing an agreement with major shareholder Singapore Power Group that will lift its annual revenue by between $75m to $85m.
  • Apex Minerals (AXM) has completed its $58.5m capital raising – down 3.6% this morning.
  • Webjet (WEB) are unchanged today as they announce their profit growth has continued to increase and that they will embark on a 3.75m share buyback.
  • Australian August private sector credit growth remains low at +0.5% – in-line with RBA’s forecast. Confirms Australian domestic demand is cooling. RBA likely to maintain easing bias.
  • ABN AMRO says the Australian Government’s $4bn investment into the AAA rated RMBS market should provide support to the smaller regional banks, but isn’t the type of move which would stabilize the markets.

MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.

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