The credit crunch is spreading out, with tentacles in all corners of the world.

In Australia:

THE Australian sharemarket was a sea of red this morning after further drops on Wall Street overnight.

At 10.15am (AEST), the benchmark S&P/ASX200 index had lost 98.1 points, or 1.64 per cent, to 5866.7 while the All Ordinaries dropped 97.4 points, or 1.63 per cent, to 5885.1.

On the Sydney Futures Exchange, the September share price index contract dropped 118 points, or 1.98 per cent, to 5846 on a volume of 7660 contracts.

In the US, stocks skidded overnight on fresh signs that global credit markets were seizing up, while a lower profit forecast from Wal-Mart Stores Inc renewed worries about consumer spending.
Wal-Mart’s pessimistic outlook and subsequent news that a US investment firm wants to halt redemptions further damaged already shaky confidence.

In the latest sign of a deteriorating credit environment, Sentinel Management Group Inc, which oversees about $US1.6 billion in assets, told clients it wants to stop investors from withdrawing their cash to avoid forced liquidation.

In the UK:

The FTSE 100 succumbed to the global turmoil in financial markets again today, ending sharply lower as steep falls on Wall Street and worrying signals from US retailers reignited fears over a rapidly spreading credit crunch.

American giants Wal-mart and Home Depot unsettled investors with disappointing updates that heightened concerns that a softening US housing market is starting to hurt consumers.

That added to lingering concerns over the fallout from a credit crisis that began with the US sub-prime mortgage market, and as the Dow shed more than 100 points just an hour into trading the FTSE 100 wiped out earlier gains. The London index of leading shares ended the day 75.5 points down at 6,143.5, a fall of 1.2%. That undid much of Monday’s gains and reinforced a sense that the jitters which battered equities last week are nowhere near to dying away.

In Asia:

Asian stocks slumped to a three-month low, led by Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., after the banks reported losses on investments related to U.S. subprime loans.

Mitsubishi UFJ and Sumitomo Mitsui, two of Japan’s three biggest lenders, plunged to two-year lows. Toyota Motor Corp. and Westfield Group, the world’s largest shopping center owner, slid after Wal-Mart Stores Inc. cut its profit forecast, adding to evidence that U.S. demand is cooling.

“It’s not clear how long the subprime turmoil will continue so financial shares will be sold until this problem is solved completely,” said Yasuhiko Hirakawa, who helps manage the equivalent of $80 billion at DLIBJ Asset Management Co. in Tokyo.

BHP Billiton Ltd., the world’s largest mining company, dropped to a seven-week low after metals prices declined. Japanese exporters including Sony Corp. fell after the yen strengthened against the euro and the dollar.

The Morgan Stanley Capital International Asia-Pacific Index lost 1.5 percent to 147.09 at 11:09 a.m. in Tokyo, set for the lowest close since May 3. About 11 stocks fell for each that rose.

Japan’s Nikkei 225 Stock Average slid 1.6 percent to 16,577.39, halting a two-day advance.

Throughout the Americas:

Brazil’s main stock index fell for a fourth day, its longest losing streak since September, on concern that a slumping U.S. real estate market will curb consumer spending and growth in Brazil’s biggest trade partner.

Brazil’s Bovespa Index of the most-traded stocks on the Sao Paulo exchange dropped 1,522.26, or 2.9 percent, to 50,911.75, led by miner Cia. Vale do Rio Doce. Mexico’s Bolsa fell for the third time in four days, while Chile’s IPSA fell the most in 11 weeks.

Latin shares fell after Wal-Mart Stores Inc., the world’s largest retailer, said second-quarter profit rose less than analysts anticipated and lowered its earnings forecast. Home Depot Inc., the second largest U.S. retailer, said the home-improvement market will “remain soft” due to slowing home sales and declining house prices.

“Everybody’s cutting earnings estimates a bit due to this credit problem,” said Alvaro Bandeira, partner at Agora Corretora, Brazil’s biggest stock brokerage. “The third quarter may not be as good as everyone has been expecting.”

Vale, the world’s second-biggest nickel producer, fell for the third time in four days as prices for the metal fell almost 50 percent below a May 4 record. Nickel slipped 0.6 percent to $27,300 a ton on the London Metals Exchange. It traded at $51,600 a ton three months ago.

“Nickel went all the way up and now its trading all the way down there,” Bandeira said. Vale fell 3.70 reais, or 5 percent, to 71 reais.

Mexico’s Bolsa index retreated 711.47, or 2.4 percent, to 28,895.73, dragged down by America Movil SAB, the index’s heaviest weighted stock.

And now, for the icing on the cake. Oil, which had also been in retreat, has turned around and headed for the skies again. How much better can it get? Stocks sliding, credit drying up, and energy spiking?

Global oil prices rose on Tuesday after crude producers’ cartel Opec upgraded its estimate for 2007 world oil demand growth, despite the current turmoil gripping world financial markets.

The price of London’s Brent North Sea crude for September delivery added 20 cents to $70.43 per barrel.

New York’s main futures contract, light sweet crude for delivery in September, gained 42 cents to reach $72.04 per barrel.

The Organisation of Petroleum Exporting Countries said in a monthly report that world oil demand growth in 2007 was forecast at 1.3 million barrels per day (bpd), or 1.5 per cent.

That was “slightly higher” than the estimate given last month and reflected “additional oil needs for Japanese power plants,” the Opec report said.

Opec noted that “over the last four weeks, prices for (New York) crude oil have exhibited extreme volatility,” as the world economy has experienced stock market and other economic fluctuations.“There is no doubt that the above uncertainties have clouded the outlook for oil demand,” Opec said.

It added that US economic problems such as the “recession in the housing sector, in particular the sub-prime mortgage market” have precipitated “fears of a global economic slowdown.” Last week, oil prices plunged by more than 7 per cent in London, and by almost 6 per cent in New York as traders feared that global energy demand may weaken.

Recent intervention by the US Federal Reserve and other central banks, pouring tens of billions of dollars into financial markets to ease tightening credit, has appeared in part to soothe jittery investors.

“Overall strong fundamentals conditions (of strong global demand and tight supplies) are keeping prices … underpinned above the $70 mark,” said analysts at Barclays Capital.

They added that “broader financial developments continue to take central stage in setting short-term price direction.” Elsewhere on Tuesday, traders kept a keen eye on weather in the US Gulf of Mexico, where many US energy installations are based.

In America and all over the world, the average schmuck is in for a long, hard slog.  How do you suppose Chimpy and his cabal are dealing with the situation? In their usual way, of course: complete and utter cluelessness.

As it did last week, the Federal Reserve injected extra cash into the banking system yesterday, soothing financial markets that have been roiled by signs of a credit crunch. Unfortunately, the Fed’s deft and timely response has not been matched by the White House or the Treasury Department, which have yet to exert strong leadership or even convey a full grasp of the seriousness of the problem.

As credit markets seized up and stocks gyrated last week, the White House appeared weirdly disconnected if not in outright denial. After a meeting with his economic team on Wednesday, Mr. Bush waxed on about tax cuts, while his Treasury secretary, Henry Paulson, said little. When asked at a press conference on Thursday about the state of the housing market — a source of today’s financial market woes — Mr. Bush expressed the view that it is headed for a “soft landing.” In the face of soaring defaults, lender bankruptcies and investor losses, statements like that are so jarringly out of touch that they’re bound to only evoke more anxiety — just what jittery markets don’t need.

And in one area where Mr. Bush could have made an immediate, concrete contribution for the better, he did the opposite. At the press conference, Mr. Bush said that he did not support a proposal to allow Fannie Mae — the government-sponsored agency that is the nation’s largest buyer of home loans — to purchase an extra $72 billion of mortgages from banks and other lenders. Apparently following his cue, federal regulators blocked the proposal.

That’s a shame, because some of the additional billions could be deployed as part of a well-regulated plan to help homeowners who are now at risk of default as tight money makes it difficult for them to refinance out of soaring adjustable-rate mortgages. Fortunately, the regulators’ decision is reversible — and should be reversed as a way to help hard pressedcredit-worthy borrowers.

What is especially troubling is that Mr. Bush’s reasons for not supporting a larger role for Fannie Mae seem to be based more on politics than on a prudent analysis of the situation at hand. For years, the Bush administration has sought to diminish the power of Fannie Mae, mainly because it does not believe in a robust government role in affordable housing, Fannie Mae’s mandate. If the agency were to play a helpful role now, the administration’s arguments for weakening the institution could be undermined.

That is, no doubt, an important political consideration for the White House. But such considerations should have no place in crafting a response to a credit squeeze and an unfolding foreclosure crisis. In times like these, the president and his Treasury secretary should be working hard to inspire confidence and to help vulnerable Americans. We’re waiting.

Waiting for Chimpy to do something that makes sense. We’re SO frigging screwed.

Heckuva job, Chimpy.

This entry was posted on Tuesday, August 14th, 2007 at 11:22 pm and is filed under The Republican Depression of 2008-?. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.