Yen's Rise Brings Asian Stock Woes

The Nikkei sunk to a 26-year low on Monday morning, amid a larger Asian markets sell-off, as the realization sinks in that no amount of government intervention will avert what the New York Times calls "a deep global recession." The Asian market slide comes despite a "record" interest-rate cut in South Korea, Reuters reports, and a seldom-seen joint G7 warning that central banks around the globe would step in to put the brakes on the soaring yen. The problem is that the yen is seen as one of the few safe-haven investments in the region, causing a flight from equities that are crippling the Asian markets. "The yen has appreciated to alarming heights against other key currencies, to the detriment of exporters, who are seeing their international competitiveness eroded as a result," the NYT adds. The jitters in Asia shook Europe, too. Bourses in London, Paris, and Frankfurt all opened sharply lower, the BBC reports.

None of this overseas turmoil bodes well for equities in the United States this week, already down more than 20 percent this month alone. That's right: Take your pick of the index, and it's grim reading. Reuters tallies: "[S]o far this month, the Dow is off 22.8 percent, the S&P 500 is off 24.7 percent and the Nasdaq is down 25.8 percent—putting them on track for their worst month since the October 1987 crash. In the S&P's case, this October could wind up being its worst month ever in the post-World War Two era." When will we hit bottom? It's anybody's guess, but that hasn't stopped market prognosticators from sticking their heads out and declaring at what level the carnage will end. “To make a crazy forecast today is not crazy,” Owen Lamont, a former Yale professor who has studied economic forecasting, told the NYT. "It’s not crazy to predict the Dow is going to 2,000. That’s in the realm of possibility."

All this global recession talk is doing a job on the price of crude oil, down again in Asian trading on Monday, the AFP reports. So much for OPEC's latest supply cuts when global demand this year is expected to fall for the first time in a quarter-century, as the NYT points out in an editorial today that urges the cartel to hold steady on further reductions in output. Not surprisingly, the Gulf economies are revealing to the world they are no longer insulated from the global financial downturn. On Sunday, the NYT writes, "Kuwait suspended trading in shares of a major bank and the Saudi authorities announced a plan to help citizens receive credit." The Wall Street Journal adds that Kuwait is now guaranteeing bank deposits and property developers are seeing weakness in the go-go real-estate market in Dubai.

How bad was Goldman Sachs' situation just a few weeks ago? Bad enough for it to initiate merger talks with Citigroup, the Financial Times and WSJ report. "In a dramatic example of the secret manoeuvring that preceded the government bail-out of the financial sector," Lloyd Blankfein, Goldman Sachs’ chief executive, called Vikram Pandit, his Citigroup counterpart, to explore joining forces, "at the tentative suggestion of the regulatory authorities or at least with their blessing," the FT writes. Though the talks went no further, the very fact that Goldman—which "has long prided itself in its independence"—felt impelled to explore a merger "underscores the severity of the U.S. banking crisis," writes the WSJ.

While we're discussing the urge to merge, the WSJ also reports that if Chrysler and GM don't agree to join forces, and if the federal government doesn't pony up an auto bailout, the Big Three could be reduced by the end of the year. "Though GM and Chrysler dismiss the notion, analysts and investors have begun to question whether one of the companies—locked out of the credit markets and burning cash rapidly—might have to seek bankruptcy protection," writes the WSJ. Even as a merger talks speed ahead any GM-Chrysler hitch-up may still "hinge on state and federal authorities' willingness to aid the struggling U.S. auto industry," adds the Detroit News.

This may not come as a complete surprise, but it looks as if Christmas is going to be pretty rough for retailers. "Retail executives are expecting this to be the toughest holiday season in more than 15 years," a BDO Seidman analyst told the WSJ. And that's before the pirates have their way with the Xmas booty. The BBC reported late last week that pirates operating off the coast of Somalia are posing such a threat to the Asia-Europe trade routes—stealing cars and clothes (and tanks, of course)—that shippers are diverting the long way around South Africa. That adds a couple of weeks to the journey and is threatening holiday-season retail supplies. Do they know it's Christmas? Don't blame the pirates if you can't get hold of a netbook in December. The FT reports that an explosion in demand for mini-notebooks means these "miniature, low-priced laptops has quickly assumed a central place in the computing world" and has prompted Intel to warn it "had been unable to keep up with demand for the new low-power processors used in netbooks."

Finally today: Does the success of AC/DC's new album portend more bad times ahead? The Guardian looks at the long history of the Aussie heavy-rock legends and notes the band first formed in 1973 in the midst of the first global oil crisis, only to hit a creative and commercial peak with the success of Back in Black—released in 1980, "just as inflation had reached 20% and unemployment inched towards 2 million"—in the United Kingdom, at least. "Last night came final and irrevocable proof that the [United Kingdom] is entering tough economic times, unseen since the 80s: AC/DC have returned to the top of the album charts for the first time in 28 years," the Guardian head-bangs on.