Sunday, October 12, 2008

By Tami Luhby, CNNMoney.com senior writer

Last Updated: October 11, 2008: 9:04 PM ET

NEW YORK (CNNMoney.com) -- World leaders, warning of a global economic downturn, pledged Saturday to work together to find solutions to what is unfolding as the worst financial crisis since the Great Depression.

President Bush and finance officials from the Group of Seven, Group of 20 and the International Monetary Fund - gathering in the nation's capital - vowed vigilance in helping economies around the world on the road to recovery.

Concerns about the solvency of banks and financial institutions in recent weeks "had pushed the global financial system to the brink of systemic meltdown," said Dominique Strauss-Kahn, IMF managing director.

Strauss-Kahn said steps taken so far by the United States and European nations hadn't been fully effective and that more would be necessary in "the coming months."

For his part, President Bush did not announce any new actions to stem the financial panic gripping the world, but reiterated measures world leaders are taking to strengthen financial systems.

"We recognize that the turmoil in the financial markets is affecting all our citizens," Bush said early Saturday morning. "All of us recognize this is a serious global crisis that requires a serious global response for the good of our people."

Both Bush and U.S. Treasury Secretary Henry Paulson spoke about the latest step being contemplated by the United States - injecting much-needed capital into banks.

"In recent weeks, financial market turmoil intensified throughout the world and credit markets froze, causing a chain reaction resulting in non-financial companies experiencing difficulty in financing normal business operations." Paulson told an IMF meeting.

The Bush administration is considering whether to use the authority granted in the $700 billion rescue plan enacted on Oct. 3 to take ownership stakes in financial institutions to stabilize and restore confidence in them.

Other countries are also taking action to inject liquidity, protect citizens' savings and strengthen financial institutions in their own nations, he said.

Finance leaders from the world's top economies, the Group of Seven, pledged Friday night to take steps to keep leading institutions afloat, unfreeze credit, ensure banks have enough capital to kick start lending and safeguard depositors' funds and restart the secondary markets for mortgages and other securitized assets.

Bush said that it is vital that countries work together so that their actions don't undermine others. He pointed to the emergency interest rate cut enacted this week as an example of a coordinated effort.

He plans to expand discussions beyond the G-7 ministers - representing the United States, Britain, Canada, France, Germany, Italy, and Japan - to the leaders of the G-20 emerging market and industrialized nations.

"We're in this together, we'll come through this together," the president said.

But Bush warned that it will take time to see the results. So far, all the measures world leaders have taken have done little to calm jittery markets. "The benefits will not be realized overnight," he said.

Bush made a surprise visit Saturday at a G-20 meeting of finance ministers and central bankers.

Officials of the G-20 issued a statement late Saturday saying that the "global implications" of the crisis required international cooperation.

The G-20 is made up of rich and emerging nations that produce 90 percent of the world's economic output. The meeting in Washington came at Paulson's request. Federal Reserve Chairman Ben Bernanke was also in attendance.

IMF backs G-7 commitment

The International Monetary Fund endorsed the G-7's commitment to do everything possible to jumpstart the world's economies.

The IMF's Monetary and Finance Committee said in a statement that it "recognizes that the depth and systemic nature of the crisis call for exceptional vigilance, coordination, and readiness to take bold action."

Strauss-Kahn of the IMF said the downturn could be worse than anticipated.

"The world economy is now entering a major slowdown as a result of the most severe shock to mature financial markets since the 1930s, adding to pressure on global economies from high prices for oil and other commodities," Strauss-Kahn said.

The International Monetary and Finance Committee - the steering arm of the IMF - began its 18th fall meeting Saturday. The 185-nation IMF was created in 1945 to coordinate international financial stability efforts, aiming to avoid financial collapses.

The World Bank, which is a similar organization with a slightly different mandate, also started its fall meeting Saturday. It focuses on longer-term aid for troubled countries, investing in such things as infrastructure development.

Week of fear

The meetings in Washington cap a week in which fear gripped financial markets worldwide. The Dow Jones industrial average had its worst week ever, falling just over 1,874 points, or 18%. Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.

Since the mid-September collapse of Lehman Brothers sparked the latest chaos in the financial markets, Bush has repeatedly tried to reassure the Americans.

"We can solve this crisis - and we will," said Bush, in a speech at the White House Friday, his 27th commentary on the nation's financial health. "Here's what the American people need to know: The U.S. government is acting, and we will continue to act, to resolve this crisis and return stability to our markets," he said.

The government has started taking a number of steps to attack the crisis, Bush said Friday. These include helping homeowners to refinance into more affordable mortgages; cutting the target for the federal funds rate; unveiling a plan to support the market for commercial paper; and offering government insurance for money market mutual funds.

The plan will authorize the Treasury to buy bad mortgage-related investments from finance companies, unfreezing the credit markets by freeing up banks and finance firms to lend once again.

2) Commentary by David Zwebner, CEO of CommStock Trading 

U.S. Economy
The stock market traded like a roller coaster again, at one point dropping as much as 8% with the anxiety level at a fever pitch. By the end of the day, the December S&P 500 closed down 21.50 at 891.00. In the past two weeks, the December S&P 500 is down 27%.

Commodities, in general, were lower, still pressured by concerns over the financial panic. The October one month Libor rate was slightly higher, still a sign that lending remains tight among international banks.

Officials from G-7 met today and considered ways to stem the panic. One possibility is to guarantee lending between banks. The June eurodollars closed up .10 at 97.63.

The U.S. Census Bureau said that exports fell $3.4 billion in August to $164.7 billion while imports fell $5.5 billion to $223.9 billion. The result was $59.1 billion of net imports, roughly as expected.

It may be hard to believe today, but former Federal Reserve Chairman Greenspan said that he expects the U.S. housing market to begin recovering in the first half of 2009. January lumber closed down $6.20 at $200.80.

Grains and Cotton
The USDA said that the U.S. 2008-2009 ending stocks estimate of:
Corn was increased from 1.018 to 1.154 billion bushels.
Soybeans was increased from 135 to 220 million bushels.
Wheat was increased from 574 to 601 million bushels.
Sugar was increased from 505,000 to 656,000 tons.
Cotton was increased from 4.90 to 6.20 million bales.

The USDA said that 2008-2009 world ending stocks estimate for:
Corn was reduced from 110 to 108 million tons.
Soybeans was increased from 51 to 55 million tons.
Wheat was increased from 140 to 144 million tons.
Cotton was increased from 52 to 55 million tons.

Grain prices were sharply lower today, dominated by the financial panic. December corn closed down its 30-cent daily limit at $4.082. November soybeans closed down their 70-cent daily limit at $9.10.

December cotton closed down its 3-cent daily limit at 49.44, also hurt by today's increase in the USDA's ending stocks estimate.

Orange juice
The USDA said in its first estimate of the 2008-2009 season that they expect the Florida orange crop to total 166 million boxes, down from last season's 170 million boxes, but more than analysts were expecting. The projected juice yield was 1.59 gallons per box at 42.0 degrees Brix, down from last year's record high 1.67 gallons per box. March orange juice closed down 5.55 cents at a new contract low of 83.60.

Cocoa
The Ivory Coast's cocoa management committee is a little slow getting started this year, but today, they handed out 50 export licenses so the new cocoa crop could start flowing out of the country. December cocoa closed down $86 at $2,244.

Energies
The International Energy Agency (IEA) reduced its forecast of 2008 world oil demand from 86.7 to 86.5 million barrels per day, an increase of just .5% from last year. In 2009, the IEA is expecting world demand to increase .8% to 87.2 million barrels per day. December crude oil closed down $8.63 at $77.99, the lowest close in eleven months.

Metals
December gold closed down $27.50 at $859.00 as investors struggle to decide if gold is really a safe haven or just another commodity that needs to be sold for cash.

Currencies
Statistics Canada reported that Canada's unemployment rate remained at 6.1% in September with a surprisingly strong net gain of 106,900 jobs, the biggest one-month gain in at least 30 years. Voters will choose their Prime Minister on Tuesday, October 14th. In spite of today's good news, the December Canadian dollar fell 3.25 cents to 84.43, the lowest spot close in well over a year.

David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com

3) A Fan of Forex?

Interested in reading perspectives and analyses on the Forex market?  In learning what factors affect the Forex market every week and what to be on the lookout for?  In getting trade recommendations?   Email mona@ecommstock.com  to get your copy of a weekly Forex report.

4) Closing Prices for Friday, October 10, 2008 

Amidex: Amidex35 (Class No Load Shares), $10.90; Index, 1498.40, Daily Change, -5.09%; “A” Shares NAV, $8.40.

Global Asset Management: Capital Appreciation, $217.19; Composite Absolute Return, $823.60; Diversity, $680.33; GAMCO, $806.95; Interest Trend, $197.02; Trading IV-US$ Class, $141.95; US$ Special Bond Fund, $357.16.

Invesco: Asian Equity Core, $2.98; Bond, $25.13; Emerging Markets Bond, $16.38; European Bond, EUR 4.3398;

Gilt, GBP 12.18; Global High Income, $9.75; Japanese Equity Core, $1.080; UK Equity, GBP 3.81. 

JPMorgan Fleming: JF Eastern Smaller Co., $61.54; JF Japan, JPY 10,845; JF Japan Equity, $9.38;

JF Japan OTC, JPY 649; JF Japan Smaller Companies, JPY 23,647; JF Japan Technology, JPY 29,157; JF Korea, $23.33;

Pacific Securities, $132.04; Pacific Smaller Companies $14.15; Global Bond & Currency, $20.86;

JF America, $33.59; JF Europe, $30.82; JF Germany, EUR 15.23; JF Global Equity, $29.07.

PCP: North America, $10.80; Europe, $16.27; Emerging Markets, $13.78; Balanced, $7.63; Aggressive, $6.44.                                                                                             

Platinum (updated once a month – September 2008 Prices): All Weather, $131.16; Equity Plus, TBA;

Prot. Equity Plus, TBA; Prot. Income Plus, TBA; Cap. Prot. Income Plus A, TBA.

Scottish Provident: Adventurous 1, GBP 2.225; Balanced 1, GBP 1.913; USD Adventurous 1, $1.666;

USD Balanced 1, $1.763; USD Cautious 1, $1.778; For Preference: Baring GUF Eastern Europe, $72.10;

Fidelity Funds International, $24.22; Invesco Asian Equity Core, $3.160.

 Mona Liss
CommStock Trading Ltd
PO Box 7777
Jerusalem 91077
Tel: +972-2-6244963
Fax: +972-2-625 9515