Is Iceland really a worse bet than Kazakhstan or Lebanon? Markets for the week ending 3-Oct

Debt markets seem to think so as sovereign spreads have soared.
Interestingly, combined assets of the top three (Glitnir, Kaupthing and Landsbanki) are about nine times Iceland's gross domestic product.
Maybe someone will start to notice that this tiny nation is over-banked.

but more seriously, this is an update of the repercussion on the emerging market world post developed world credit crunch:

a)MSCI Emerging Markets Index lost 8.8 percent this week, the most since July 2002.
b) Turkey's benchmark index headed for its biggest decline since March 17, falling 6.6 percent, to 33,671.27 at 9:50 a.m. in the first trading day since Sept. 29.
c) Russia's Micex Index extended its loss this year to 49 percent. Russia suspended trading for two days and pledged more than $150 billion in emergency funding last month as the seizure in capital markets, falling oil prices and a five-day war with Georgia in August drove away investors.
d) India's Sensex index is at its lowest in a year.
e) Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. The index has slumped 31 percent from a record on July 3.

Economic Indicators
US Payrolls plunged
US PMI indicates significantly faster rate of decline in manufacturing during Sept (lowest since Oct 2001)
Markets are pricing in rate cuts in Europe after dovish comments from ECB this week
VIX (measure of US equity volatility, market's so-called fear guage) remains at historic highs
Money markets still frozen and companies are being shut out of commercial paper market

European Market Commentary
All main European markets closed up on Friday (between 2 to 4 percent) as U.S. House of Reps voted to prevent amendments to the proceedings
Materials and Financials sector outperformed. +4.3% and +3.7% respectively.

Eric Tan, London

US indicators hit recessionary levels - Further deterioration likely ? Markets for the week ending 1-Aug

- Initial jobless claims rose to 448k (highest since April 2003)
- Payrolls: July non-farm payrolls fell 51,000 after 62,000 decline in June 08
- Unemployment rate rose to 5.7% with Goldman and Merrill forecasting it to hit 6.25% to 8% from 2H08 to 1H09
- US treasuries advanced as market took the view that interest rate rises before year-end were becoming more unlikely

Scenario:
Although the U.S. economy expanded at 1.9% in Q2 2008, led by the boost of tax rebates on real consumer spending, there's a good chance that growth will slowdown again in Q3 and hit a trough in Q4-08 and Q1-09 as economic and financial weaknesses continue.

Commentary
This week we have seen record earnings announcements from oil companies, alongside depressing results from GM, BA, BT, Vodafone and continuing concerns in the financial sector. Market continues to look towards oil prices after a $20 fall in July for more relief. However, given that US inventories are low, futures curve are flattish till 2016, there is little to suggest that prices will collapse in the short term. Although US motorists are driving less and airlines are grounding uneconomical flights, China and India's thirst for energy will offset any fall in demand for petroleum and keep prices higher for longer.

Eric Tan, London