Hidden behind the Greek drama over the past few weeks and unveiled again yesterday with the FOMC statement and action, the unfolding global economic slowdown is back to front and center. The US$ is the main beneficiary, not due to its own characteristics but disappointment with others, exactly as was seen in ’08 and notwithstanding more Fed action. Commodity currencies in particular are down sharply on the slowdown fears. Treasury yields are also falling again not only in the US but in the UK, Germany, France, Australia, New Zealand and other Asian countries. Italian and Spanish yields are down too. Greek bonds are a bit higher as Greece is finally stepping up in dealing with their bloated public sector although its too little too late in staving off an ultimate default past the disbursement of the next tranche of money to them. China’s preliminary HSBC Sept mfr’g figure fell a touch to 49.4 from 49.9. The Euro zone mfr’g and services composite index dropped to 49.2 from 50.7 and below expectations of 49.8 with weakness seen in both Germany and France. It’s the 1st reading below 50 since July ’09. The euro basis swap has completely reversed the fall last week when the expanded central bank swap lines were announced. The 3 month euribor/OIS spread is at a new recent high and the European bank stock index is back to Mar ’09 levels.
