Everyone's Jumping Into The Liquidity Pool
Several developments are boosting futures here:
1) Talk about coordinated efforts! Everyone's jumped into the liquidity pool: the Fed, the European Central Bank, Bank of England, Bank of Japan, Bank of Canada, and the Swiss National Bank are all pumping dollars into the global system. Fed made an additional $180 billion available to central banks to lend out.
European banks and insurers are up: UBSup 16 percent, Axaup 7 percent, Deutsche Bank up 6 percent.
2) Last night, the SEC said they were considering a disclosure rulethat will require hedge funds and other large investors to disclose their short positions, and they are seeking disclosure of past trading positions in specific securities. The hope here is that this will put some kind of brake on the velocity of short selling.
3) The CBOE Volatility Index (VIX) closed at its highest level since January, at levels that have corresponded with (short-term) market bottoms.
1) It's been widely reported that Morgan Stanley is in merger talks with Wachovia Bank,but on the floor and trading desks there are a lot of puzzled looks.
Wachovia has all the mortgage problems everyone is worried about, so Morgan would be buying into considerable credit risk. As one trader cracked, "All this effort, just to inherit Golden West through the back door?"
- Morgan Stanley in Advanced Merger Talks With Wachovia
- Jobless Claims Rise From Effects of Gustav
And what new deposits are created that Morgan could even use for their short-term funding needs?
It's a sign of how desperate things are that such a merger is even being contemplated. A lot of traders were hopeful HSBC might emerge as a bidder for Morgan, but there is a deafening silence on the other side.
Morgan Stanley down 10 percent pre-open.
2) FedExreported first quarter earningsin-line and said second quarter earnings would be above analyst expectations. They affirmed full year guidance.
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