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Published on Oct 4, 2008
Thursday 2 October 2008 - Good news (banking) bad news (real world)
Presented by Paul Donovan
+ The US Senate passed the bank rescue package by a large margin, and legislation goes off to the House for a vote on Friday (it is hoped). A funny thing happened on the way to the bail out. The US economy collapsed whilst waiting for political action.
+ Yesterday's US ISM manufacturing data was awful - and the survey predated the past week's events. It showed weakening domestic and foreign orders (implying more of a global slowdown), as well as softening prices (disinflation).
+ Bad data plus the financial crisis increases the prospects for US rate cuts. We think an intermeeting move is possible, but on balance expect them to wait until the FOMC at the end of the month. No such luck in Europe, where we see the ECB on hold.
+ Citizens of France must have thought they had woken up in the US yesterday, with the government suggesting a pan European bank bail out scheme. However, other economies, notably Germany, seem less than enthused by this.