Need To Know News

US shares tanked Monday after it was revealed the world’s largest economy has been in recession since December 2007 and FED Chairman Ben Bernanke indicated the downturn could be worsening. The Dow plunged 7.7%. The S&P shed 8.9%. The Nasdaq lost nearly 9%.

The bloodletting continued in Asia, where global economic concerns pounded stocks. The Nikkei fell 6.4%. The ASX lost 4%. The Hang Seng dropped 4.7%

European shares were called sharply lower. The DAX future fell 1%. The CAC future dropped 2.2%. The economic data calendar is light today, with EZ November PPI scheduled for 1000 GMT.

The currency market — with the exception of the Aussie — is taking a breather after the monster vacillations over the past few weeks. AUD/USD was off 0.8%. EUR/JPY was flat. GBP/JPY slipped 0.1%. USD/JPY was steady. EUR/USD rose 0.1%. Cable was little changed.

Bonds surged yet again as investors fled stocks. The 10yr Bund future was up 38 ticks to 122.87. The 10yr Bund yield fell 5bps to 3.12%. The 10yr Gilt was up 2bps to 3.67% after a massive slide Monday. The 10yr JGB fell 5bps to 1.35%. The 10yr T-note ws off 2bps to 2.71%.

Oil fell down a well as renewed growth concerns hurt demand hopes. WTI was off 3.3% to $47.66. Brent lost 3.7% to $46.20.

The equity selling continued on through the US session as economic gloom seemed to prevail. Europe’s Dow Jones Stoxx 600 ended down almost 6% and the S&P 500 is down almost 7%. The US manufacturing sector contracted more in Nov as did the sector globally. JP Morgan’s global manufacturing PMI hit a new low in Nov of 36.4 after dropping to 41.0 in Oct. The weakness in new orders and employment are worrisome for the broader outlook. We will be getting the global service sector PMIs later in the week and they are likely to suggest further contraction as well. The risk aversion that was evident going into today’s US session is still evident as we approach the market close. The VIX has moved up 10 points and over 65 and the US 2yr bond yield hit a new all time low.

The weak data also contributed to sharp declines in commodity prices. The CRB is off 3.7% on the day, with everything except natural gas declining in price. Oil has dropped back below the $50 level and off almost $6 on the day. Gold too is down and has nearly broken below the $870 level — off more than $40 today. Weak demand and safe haven flows behind these declines. With aggressive central bank rate cuts already priced in, the realization of lower policy rates later this week may not provide any lasting support. Economic rebound still looks far off.

The USD index has continued to be supported by safe haven flows. Today’s range during the US session was roughly 86.70-87.30. It continues to be the JPY and CHF that sit on top of the relative strength profile. JPY has gained almost 2.5% vs the USD since Friday’s close. USD/JPY started the day at about 95.50 and it is now trading just above 93. EUR/USD closed on Friday near 1.27 and it is now trading at 1.2630, up from its low of 1.2583. The GBP is at the weak end of the profile, off over 3% vs USD and EUR/GBP has moved up from about 0.8250 at Friday’s close to about 0.85 as we approach the close. The growing expectation of a 100bp rate cut by the BOE on Thursday partially behind the GBP weakness.

Bond yields have plunged today on safe haven flows. German 2s ended down 7bp at 2.12% and UK 2s down 17bp at 2.01%. The 10yr yields also lower - German down 9bp to 3.16% and UK down 11bp at 3.65%. US 2s hit a new all-time

Market continuing to give back last week’s gainsn - about half way thru the thin markets rally today.  10yr is again at an all time low yield - last 2.724%.

European shares were sharply lower as economic indicators continued to show the region’s weakness. The FTSEurofirst 300 fell 3%. The FTSE 100 was off 2.2%. The DAX led losers with a 3.3% decline. The CAC dropped 2.5%.

EZ final manufacturing PMI hit an 11yr low in November. Germany’s VDMA engineering association said plant and machinery sales fell 16% in October. German retail sales were off 1.6% m-o-m in October. The BOJ called an emergency policy meeting for Tuesday 0400 GMT.

Sterling and the euro were hammered as investors fled to safer monies. EUR/JPY fell 1.9%. GBP/JPY was off 3.7%. Cable lost 2.1%. EUR/USD fell 0.3%. USD/CHF fell 0.6%.

Bonds surged, with British government debt yields hitting their lowest levels since the 1930s. The 10yr Bund future soared 74 ticks to 122.21. The 10yr Bund yield fell 7bps to 3.19%. The 2yr Schatz was off 11bps to 2.09%. The 10yr Gilt yield was off 10bps at 3.67% and near the record low. The 2yr fell 14bps to 2.06%. The 10yr JGB was flat at 1.4%. The 10yr T-note dropped 5bps to 2.87%.

Oil was on the back foot after OPEC decided to delay production cut discussions until later this month. WTI dropped 4.3% to $52.09. Brent lost 3.9% to trade at $51.42.

* German October retail sales unexpectedly dropped 1.6% m/m (median 0.5%)

* Final eurozone manufacturing PMI expected to be confirmed at 36.2

* UK Nov manf PMI expected to hit a new low of 41.0 (median 39.8) from 41.5

* European calendar also has UK Oct mortgage lending, Swiss Nov manufacturing PMI

* US calendar has Nov ISM manufacturing, construction spending and Bernanke talk

* Canadian calendar has Q3 GDP, expected at +0.7% q/q SAAR (median +1/1%)

* EUR, AUD, GBP and NZD pressured by expectations of rate cuts this week

* ECB rate cut of 75bp tipped by Le Monde, FT Deutschland and Italy’s ANSA

* UK manufacturing conditions worst in two decades - EEF survey

* UK Nov house prices fell 1.1% on month, down 8.1% on year - Hometrack

* Asian stock markets mixed; Japan and Australian stocks lower, China higher

* US Treasury yields remain near 50-year lows ahead of ISM report, due Monday

* NYMEX crude fell under $54 after OPEC failed to cut output; gold prices easier too

* Australian Q3 company profits +5.2% v. 4.0% expected; business inventories +0.7%

* Australian AIG-PricewaterhouseCoopers Nov PMI at record lows, dropping 7.7 to 32.7

* Australian TD-MI Nov inflation gauge -0.6%, annual inflation at 3.0%

* China Nov PMI fell to record-low 40.9 from 45.2, further sign of weak manufacturing

* South Korea exports plunged to -18.3% y/y in Nov from +8.5% due to global downturn

* BoJ will hold meeting this week to create special lending program, NHK reports

Asian shares took a hit on concerns global economic growth is slowing faster than first expected. The Nikkei was 1.4%. The ASX fell 1.5%. The Hang Seng bucked the trend, rising 1.4%.

European shares were expected to open slightly lower. German October retail sales fell an unexpected 1.6% m-o-m and are down 0.4% for the first 10 months of this year verus the same period in 2007. Investors will get a better read of the economy when Spanish, French, German and EZ manufacturing PMI data is released starting at 0745 GMT. UK mortgage approvals and consumer credit are due at 0930 GMT and will be broadcast live on Need to Know News’ Scream Audio.

Safe-haven currencies were back in vogue with growth concerns plaguing investors. EUR/JPY fell 0.5%. GBP/JPY dropped 0.7%. EUR/USD fell 0.2%. Cable slid 0.4%. USD/JPY lost 0.3%.

Bonds were mixed, with European government debt higher on the likelihood of declining share markets. The 10yr Bund future jumped 20 ticks to 121.66. The 10yr Bund yield dropped 1bp to 3.25%. The 2yr Schatz was flat at 2.2%. The 10yr Gilt yield fell 1bp to 3.76%. The 2yr Gilt yield slipped 2bp to 2.18%. The 10yr JGB rose 1bp 1.41%. The 10yr T-note was unchanged at 2.92%.

Oil backed off after OPEC decided to delay discussions on production and despite reports of some countries wanting to slash output. WTI fell 2.1% to $53.28. Brent dropped 2.3% to $52.28.