While you were sleeping: Asia to back currencies, oil falls

Monday 23rd February 2009

Asian nations agreed to form a US$120 billion pool of funds to help defend the region's currencies as the global economy slumps.

The Association of Southeast Asian Nations, along with China, Japan and South Korea, announced the plan at their meeting in Thailand yesterday. The fund will help the nations defend their currencies against the sort of speculative attacks that featured in the Asian crisis in 1997.

Meanwhile, US Secretary of State Hillary Clinton, in her first visit to China, called on the Asian nation to continue to invest in US Treasuries. China, already the world's biggest investor in US government bonds, last week said it would continue buying the debt amid speculation it wants to curb its exposure.

China and the US "are truly going to rise or fall together," Clinton said in a televised interview.

Crude oil fell in New York on Friday as sliding stock markets stoked fears that the global economy won't quickly revive from its downturn. Crude for March delivery fell 1.4% to $38.94 a barrel on the New York Mercantile Exchange, having surged 14% the previous day.

Copper futures fell amid signs of rising stockpiles, as demand for the metal used to make pipes and wires abates. Copper futures for May delivery fell 3.7% to US$1.4330 a pound on the New York Mercantile Exchange.

Gold exceeded US$1,000 an ounce for the first time in almost a year as investors sought the precious metals as a haven against slumping stock markets. Gold futures for April delivery rose 2.6% to US$1,002.20 an ounce in New York and earlier reached US$1,007.70.

Stocks on Wall Street sank to six-year lows on Friday, led by Bank of America and Citigroup on speculation President Barack Obama's administration would consider nationalizing financial institutions to ensure their survival.

The Dow Jones Industrial Average fell 1.3% to 7,365.67 and the Nasdaq Composite declined 0.1% to 1,441.23. The Standard & Poor's 500 Index fell 1.1% to 770.05.

US stocks clawed back from an earlier slump after the White House hosed down speculation about nationalizations.

"This administration continues to strongly believe that a privately held banking system is the correct way to go," White House spokesman Robert Gibbs said.

Citigroup fell 22% to US1.95 and Bank of America fell 3.6% to US$3.79. JPMorgan Chase fell 3.4% to US$19.90 and General Electric dropped 6.8% to US$9.38.

Treasuries rallied on the prospects of a prolonged slump. The yield on 10-year Treasury bonds fell to 2.77% from 2.86% and the 30-year bond fell to 3.57% from 3.69%.

In London, the FTSE 100 Index fell 3.2% to 3889.06, the lowest level in three months. The DAX 30 fell 4.8% to 4014.66 on Friday while France's CAC 40 declined 4.3% to 2750.55.

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