Markets:
- Global equity markets suffered sell-offs as optimism turned to scepticism. Evidence of a deepening recession and doubts on the US stimulus package were the key drivers.
- Government bonds benefited from the shift away from equites this week
- Sterling was among the major losers in the currency markets. Bank of England unveiled a stark assessment of economic outlook and signalled that it would embark on quantitative easing policies. The pound fell 2.6% against the dollar and 1.9% against the euro.
- Commodites-wise, oil (US light crude) tumbled 12% after the International Energy Agency forecasted bleak demand, while gold rose to test the $950/ounce level on investor flight to safety.
Eurozone's dilemma
-Eurozone's gross domestic product (GDP) fell 1.5% in the fourth quarter of 2008, led by a sharp deterioration of the German economy. The data show the challenging economic circumstances across the whole of Europe- German GDP contracted 2.1% which was significantly faster than the UK although Germany had no housing bubble.
- The European Central Bank (ECB) is widely anticipated to cut its rate by another 0.5% next month to 1.5%, - its lowest rate ever.
Eric Tan, London
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