News round-up: 6 Nov 2008 – has the bear returned?

So, here we are one day into a brave new world, having seen America elect Barack Obama President. You might think the clouds would part, the sun would come out and all would be well with the world. Yet, it seems like quite the opposite is happening. Mr. Obama has one hell of a job ahead of him. The news flow has been uniquely negative — not just in the U.S. but everywhere.

Every market in Asia has tanked for three days running and the Nikkei is down to 8380 already. Small wonder — the Japanese economy is imploding. For example, car sales hit a 40-year low. Elsewhere in Asia, the world’s best airline, Cathay Pacific, hit some serious turbulence and shares were down 14%. These are just two examples of how much the global slowdown has impacted Asia.

Moving westward, South Africa is certainly feeling the ill effects of gold price falls. The Rand is getting crushed and the South African housing bubble looks set to collapse. Somehow, the word in South Africa is that Obama will save them because trade with Africa will skyrocket. Good luck.

Moving over to Europe, it was a torrent of bad news. The most salient news was the earnings losses at Hannover Re and at KBC Bank in Belgium, which also had massive writedowns. Poland was forced to give up billions illegal subsidies and the Ukraine and Hungary received IMF bailouts. Meanwhile the ECB lowered rates to 3.25%. This suggests a malaise continent-wide.

In the UK, the news started with the massive 150 basis point cut by the Bank of England. This was supposed to buoy the market but it really smacked of panic and markets crashed. Later, the Halifax confirmed Nationwide’s dire housing report, saying prices had fallen 15%. And it only gets worse from there.

In the U.S., the automakers are looking to get bailed out or go bankrupt. The market is down over 800 points. Retailers are reporting massive declines in sales and California needs revenue so much it is raising taxes in a deep recession. For me, the news of the day was the report that The Sands Hotel in Las Vegas was worried that it could not continue as a “going concern” meaning it may declare bankruptcy. This could be the harbinger of the massive number of corporate bankruptcies in the U.S. that we are going to see shortly.

Frankly, today was a day to forget. Let’s hope the news cycle doesn’t continue like this. Tomorrow is the U.S. unemployment report. I expect 6.5-6.6% unemployment. Let’s hope that is the extent of the bad news.

Global
IEA predicts oil price to rebound to $100 – FT
Oil strikes 21-month low under $US58 – SMH

Asia
Cathay Pacific in profit warning – BBC News
October new auto sales in Japan down 13.1%, to 1968 levels; Toyota cuts FY2008 profit projections by 74%

Europe/Africa
Eurozone rates lowered to 3.25%
Hannover Re Scraps Dividend Amid Writedowns, Storms – Bloomberg.com: Germany
Belgium’s KBC Swings to 3Q Loss on Writedowns – Deal Book
EU force Poland to sell off shipyards and pay back €2.3bn in subsidies – Guardian
IMF approves $16.4bn Ukraine loan – BBC News
IMF agrees 15.7bn loan for Hungary – Telegraph
Obama ‘will boost Africa trade’ – Finance24
South Africa: House prices even worse – Finance24

UK
Founding MPC member says 1.5 point cut is “radical and courageous” -Telegraph
Mervyn King’s cautious demeanour shaken by dramatic cut in interest rates – Guardian
UK: Banks pass on rates cut in full to small business borrowers – Telegraph
Business leaders warn that cut must be passed on – Telegraph
Icesave compensation will cost Treasury £800m – Times Online
Bradford & Bingley loan book concerns
Halifax: House prices fall by record 15% – Guardian
UK: Housebuilders cut jobs in face of downturn – Guardian

US< br />Las Vegas Sands Plunges on Default, Bankruptcy Risk – Bloomberg.com: Worldwide
Schwarzenegger calls for sales tax hike, cuts in services – Los Angeles Times
Retailers report steep sales declines in October: Financial News – Yahoo! Finance
Humor: Obama supports now have nothing to talk about – The Onion
Republican Party Begins Long March to Liberalism: Amity Shlaes – Bloomberg.com: Opinion
Obama’s Change You Can Believe in Meets Reality: Caroline Baum – Bloomberg.com: Opinion
Blackstone Posts $502.5 Million Loss – Deal Book
Goldman Sachs Laid Off Thousands This Week, Report Says – Deal Book