The trading in financial markets has now been closed in both the US, Europe and in Russia due to sharp declines. The shutdown is temporary, but the panic and uncertainty might pospone the closedown. Ride on, baby!
“We cut our global GDP growth forecasts to 3.9% in 2011 and 3.8% in 2012, from 4.2% and 4.5%, respectively. DM growth looks set to average only 1.5% this year and next – down from 1.9% and 2.4% previously – making the BBB recovery even more bumpy, below-par and brittle.”
Morgan Stanley Research
Rule 48 have just been invoked by the NYSE Euronext.
A few hours ago, Russian media reported that the Russian stock market had been closed for the same reasons – a sharp decline. All trading on Russia’s MICEX stock exchange has been halted until 17:15 GMT.
(h/t: Zero Hedge)
Here’s the text of Rule 48:
(a) In the event that extremely high market volatility is likely to have a Floor-wide impact on the ability of [Designated Market Makers] to arrange for the fair and orderly opening, reopening following a market-wide halt of trading at the Exchange, or closing of trading at the Exchange and that absent relief, the operation of the Exchange is likely to be impaired, a qualified Exchange officer may declare an extreme market volatility condition with respect to trading on or through the facilities of the Exchange.
(b) In the event that an extreme market volatility condition is declared with respect to trading on or through the facilities of the Exchange, a qualified Exchange officer shall be empowered to temporarily suspend at the opening of trading or reopening of trading following a market-wide trading halt: (i) the need for prior Floor Official or prior NYSE Floor operations approval to open or reopen a security at the Exchange (Rules 123D(1) and 79A.30); and/or (ii) applicable requirements to make pre-opening indications in a security (Rules 15 and 123D(1)).
The rule was approved by the Securities and Exchange Commission on Dec. 6, 2007.
(Source: The Wall Street Journal)
Check the developments at the major stock exchanges here:
Morgan Stanley – Dangerously Close to Recession
“Corporate entities are expected to scale back capital spending and revert to cash preservation mode. Investment grade corporates snatch top spot for most favoured asset class, ahead of high yield, whilst cash moves to joint third from sixth place in Q211. Access to funding remains the key perceived risk to bank credit quality, with a higher proportion of respondents citing this factor as critical. Over the coming 12 months, the majority foresee tight or tightening bank lending conditions, receding from the overall expectation of loosening in the previous survey.”
Oh, and a little bit more…from BNP Paribas:
“The recovery’s weaknesses are now coming to light. The crisis caused growth to collapse without a proportionate fall in asset prices; barely had the recovery begun than the world economy found itself in a position of excess liquidity, creating the preconditions for a commodity bubble that has now materialised. The overheating of certain developing economies has worsened, whilst, in the G3, under utilisation of production factors has persisted, or has even been more marked. International financial imbalances remain. The sustainability of Greek government debt is becoming highly problematic, whilst the systemic risk for banks and governments in other in other peripheral euro zone countries are far from being resolved. The recovery in the US shows signs of running out of steam and the outcomes of unrest in the Arab world remain uncertain.”