Trading Diary (March 04, 2009) --- Bee Gees "Staying Alive"

Overnight, I saw ytd 4.6% decline in S&P and 4.2% drop in DOW has thus far been followed by only modest corrective gains in US stock index and that condition has kept USDEUR supportive. Headline news are negative…1) Bernanke said the banking system has not yet stabilized, spurring concern that the govt won’t be able to shore up the financial system; 2) Comments from Obama to Bernanke and Geithner seemed to view the start of $1trn TALF on 25Mar a breakthrough for credit markets?! 3) Google CEO talking about a dire economy and Moody’s considering a downgrade of AMBAC; 4) the downward drivers include poor housing (-7.7%), weak car sales (9.1mn) and confidence (-49).

In my own view, the guessing game now among the OECD economist and investors is how worst the 1Q09 will be. The recent forecasts seem likely to shift for the OECD from -0.4% in 2009 to something worst since 1946. This has led to a credit spread widening with EUHY at 1141bp and Itxx Asia HY at 1539, new highs in 3 months. As I discussed, the weakness of credits and equities have driven safe-haven trade in FX– namely the USD, especially the notable gain of USDJPY…But I think the most depressed thing I see is gold down $25 even in the face of more talk about govt action & fiscal spending but less belief that actions will work quickly or well…Next game is roll over to ECB and BOE for that challenge …In sum, I will not betting on the roll-over in equities as I have the Bee Gees songs in mind -- "Ah, ha, ha, ha, stayin’ alive, stayin’ alive"

Local market will likely see further weakness repeated following US. One thing is for sure is HSBC is a firm darling in local investors as ytd 5HK managed to trade up after 7% lower in London. HK Property is likely to be under-pressure as newspaper post more evidence of "demand slide and supply glut lead owners to offer discounts. In China, talks of Feb bank lending to RMB1.1trn and Baosteel lowered HRC&CRC by up to 5.3% or 200/ton to mirror the weak market conditions. PMI is out with better no at 49…Think HK is lower 100ppt today.

Overseas Market Reviews

Global equity prices dipped another 0.8% O/N, down 19% ytd and 55% from Oct2007. Regionally, stocks fell 1.7% in EU, and -0.7% in Japan and US, while EMs was flat. EM equities have outperformed in 2009—down 9% ytd vs. a 20% decline in DMs. 1MWTI oil rose $1.50 to $41.65/bbl. 2yrand 10yr UST yields edged up 1bp and 2bp, respectively, to 0.88% and 2.88%. USD closed at EUR1.256 (up 10% ytd) and YEN98.2 (up 8% ytd).