RP allots 100 billion peso crisis standby fund
October 22, 2008 § 1 Comment
Philippine president Gloria Macapagal-Arroyo just ordered the Philippine finance department to allocate 100 billion pesos as standby fund to cushion the impact of a worsening US recession. Economic managers of the administration realized that analysts are right–the impact of this global crisis is still to come. We’re still in the periphery, so to speak, of its impact.
Stock markets around the globe are still suffering from huge daily losses. Cautiousness and fears of a prolonged global economic slowdown are giving investors a shiver and no amount of assurances from governments around the world can erase sagging investor confidence. Let me just cite what Google news reported today. It just proved earlier fears that the global economy is entering an apocalyptic financial ice age that would put economic growth to a dangerous stand-still.
On Wall Street, the Dow Jones Industrial Average plunged 2.50 percent to close at 9,033.66 and the tech-heavy Nasdaq composite dropped a hefty 4.14 percent to 1,696.68.
The broad Standard & Poor’s 500 index slid 3.08 percent to 955.05, following strong gains on Monday amid signs of momentum behind a second US economic stimulus package and easing interbank credit.
“Several companies posted quarterly earnings misses and cautious outlooks that overshadowed signs of improvement in the credit markets,” analysts at Briefing.com wrote in a client note.
In Latin America, Brazil’s main index lost 1.01 percent, while Argentina’s market shed 10.99 percent after the government announced the nationalization of the country’s private pension system.
Most European exchanges ended the day with losses, although the CAC 40 in Paris managed to gain 0.78 percent to close at 3,474.40.
The London FTE 100 index of leading shares shed 1.24 percent to reach 4,229.73 points while in Frankfurt the DAX lost 1.05 percent to end the session at 4,784.41.
Elsewhere there were declines of 0.96 percent in Brussels, 1.39 percent in Milan, 1.50 percent in Madrid and 0.50 percent on the Swiss Market Index.
The interbank lending rate continued to fall on Tuesday, suggesting that newly confident banks were once again prepared to lend to one another and to businesses.
The key three-month Libor interbank rate in dollars in London dropped below 4.0 percent for the first time since September 19.
A high reluctance to lend by banks over the past few weeks, when they feared that borrowing banks might be in severe financial trouble, had contributed to an acute credit crisis that threatened the health of the global financial sector.
But sentiment on Wall Street was dampened Tuesday after a wave of corporate financial results highlighted the challenging economic conditions.
The Canadian central bank declared the US economy in recession as it announced a second unscheduled interest rate cut this month to stimulate domestic demand.
The contracting US economy would lead to a “mild” global recession, the bank warned, following weeks of turmoil on financial markets and tightening credit.
“The global economy appears to be heading into a mild recession, led by a US economy already in recession,” said the Bank of Canada as it gave the reasons for its quarter-point interest rate cut.
The International Monetary Fund recently forecast the world’s largest economy would shrink in the third and fourth quarters, meeting economists’ technical definition of recession as two consecutive quarters of contraction.
Caterpillar, the heavy equipment manufacturer viewed as a bellwether of the US economy, slid 5.06 percent to 38.83 dollars after reporting net profit fell in the third quarter.
Elsewhere, the Federal Reserve announced it was offering up to 540 billion dollars of help to money market mutual funds in its latest response to the global credit crunch.
The move is a further attempt to unblock the market for commercial paper, which is debt issued by companies to raise short-term cash and an essential part of corporate finance.
In Europe, the European Central Bank said Tuesday it would pump roughly 400 billion euros (530 billion dollars) into eurozone money markets in coming days to get cash flowing in the clogged-up financial system.
French President Nicolas Sarkozy, speaking a day after France agreed to inject 10.5 billion euros into its six leading banks, issued appeals to his European counterparts.
He called for coordinated sovereign wealth funds in Europe and also for an “economic government” to oversee the 15-nation eurozone.
In Asia on Tuesday, Tokyo jumped 3.34 percent as Sydney gained 3.9 percent.
On the downside, however, Hong Kong closed down 1.80 percent, Shanghai lost 0.78 percent and Singapore shed 0.95 percent.