Opening Bell: 11.10.08

Author:
Publish date:
Updated on

China Authorizes Massive Bailout (FT)
The Chinese have authorized a bailout package of unprecedented size: $586B. In a statement regarding the bold move, "The government said the spending plan reflected a decision to adopt an "active" fiscal policy to deal with the global financial crisis, while monetary policy would be "moderately active".
The problem inherent in China's "throw money at it until it goes away" plan is that the core of China's revenue comes from manufacturing, and unfortunately, people just aren't buying right now.
"Two recent surveys of manufacturers showed a slump in activity in October, confirming anecdotal evidence that the slowdown has accelerated in recent weeks. Some economists believe that growth, which was nearly 12 per cent last year, could fall to as low as 6 per cent next year without a substantial fiscal stimulus."
And further, China seems to be acting on the principle that 12% year over year growth is healthy, whereas a 6% annual growth rate is slow, and weak. I don't mean to be a contrarian here, but that's just stupid: the idea that any country can sustain 12% growth over any respectable period and not expect some form of economic whiplash fights against all common sense.
Circuit City's Bankruptcy Filing Affidavit (Dealbook)
Overnight Markets Gain On News of Chinese Extravagance (Reuters)
The Nikkei was up 3.6% overnight as Japan celebrated the massive spending package laid out by long time foe China; Exporters, Shippers, and Machinery companies were the biggest movers on the exchange. Other popular buys included pharmaceuticals, long seen stable in the face of economic slowdown.
As a side note, "Kawasaki ... soared 14.1 percent to 211 yen after the machinery maker said it had received orders for another 140 New York subway cars worth about $275 million."
The FTSE was also up overnight, showing a 2.9% surge (at print) with gains "across the board." The biggest impact appears to have been in Mining and Energy however, with Lonmin, Anglo American, BHP Billiton and Xstrata all up more than 10% and Energy gains over 3%.

Related