Asian Markets Shaken By Lehman Failure, Merrill Sale

Sensex, Taipei Lead The Regional Fall As Major Indices Close For Holiday

The stock markets across the Asian region open for trading tumbled after U.S. investment bank Lehman Brothers filed for Chapter 11 bankruptcy protection. Meanwhile, Merrill Lynch agreed to be acquired by Bank of America. Crude oil futures fell sharply in the Asian session as the refineries along the Gulf of Mexico coast escaped major damage from Hurricane Ike.

U.S. crude oil futures for October delivery stood $4.44 down at $96.74 by 5:45 a.m, after the contract for October settlement closed at US$101.18, up 31 cents, on the New York Mercantile Exchange on Friday.

The U.S. dollar fell against the major Asian currencies on weakness in the U.S. financial sector. The Australian dollar finished the session stronger at US$0.8167-0.8171 and the kiwi bought US$0.6686-0.6696 in late local trade compared to US$0.6536-0.6538 at close on Friday.

The financial markets in Japan, Hong Kong, China and South Korea remained closed on account of public holidays.

Of the remaining, the Australian stock market fell sharply, giving away most of Friday's sharp gains. The benchmark S&P/ASX 200 index closed down 86.1 points or 1.8% at 4,817.7 after falling to a five-week low of 4,770.9. The broader All Ordinaries index lost 82.1 points or 1.7% to finish at 4,875.0.

On the economic front, the Australian Bureau of Statistics said that residential building starts plummeted to its lowest level in a year in the second quarter. The total number of houses started in the three months to June stood at 38,348, down a seasonally adjusted 3.7% from the March quarter.

The New Zealand stock market closed sharply lower, reversing Friday's gains. The benchmark NZX 50 index closed down 41.79 points or 1.26% at 3,319.90 after gaining 0.84% on Friday and the broader NZX All Capital index lost 45.03 points or 1.34% to finish at 3,348.11.

On the economic front, manufacturing sales in New Zealand eased slightly in the second quarter of 2008 in terms of both dollar value and volume. Statistics NZ reported that manufacturing sales value for the three months through June were down 0.6% while manufacturing sales volumes decreased 1.0%. When meat and dairy product manufacturing is excluded from the figures, sales rose 3.1% and volumes increased 1.8%. Manufacturing sales rose 3.0% in the preceding quarter.

Meanwhile, services sector activity in New Zealand contracted in August, according to the latest survey from the Bank of NZ and Business NZ. The group's Performance of Services Index fell one point to 47.9, the fifth straight month of decline. A reading below 50.0 indicates that activity in the sector is contracting.

The Taiwanese stock market plunged, with the weighted index closing at near three-year lows. Additionally, Taiwan dollar's fall heightened fears of capital outflow romp the stock market. The Taiex weighted index closed down 258.23 points or 4.09% at 6,052.45, its lowest closing since November 17, 2005 when it ended at 6,020.94.

In Philippines, the stock market ended the day in slumps, extending a massive slide witnessed in the last few weeks as the global markets fretted on worsening situation on the US financials front. The benchmark PSEi index dropped more than 4.2% to end at 2536.16 points - a three week low.

In India, the news that China's central bank has cut interest rates helped the domestic bourses cut steep intra-day losses. Despite the recovery, the market ended the day with heavy losses. The BSE 30-share Sensex was down 517.46 points as per provisional closing. Fears of more foreign fund withdrawals weighed heavily on the Indian bourses today, 15 September 2008, after US investment bank Lehman Brothers filed for bankruptcy protection.

The BSE 30-share Sensex was down 517.46 points or 3.70% to 13,483.35, as per provisional closing. The Sensex opened with a huge downward gap of 408.76 at 13,592.05. At the day’s low of 13,150.81 hit in mid-morning trade, the Sensex lost 850 points. 27 from the 30-member Sensex pack suffered losses. The S&P CNX Nifty was down 167.45 points or 3.96% to 4,061 as per provisional. It had touched an intra-day low of 3,955.40.

Elsewhere, the Singapore stock market plummeted, with the benchmark Straits Times Index closing down 84.12 points or 3.27% at 2,486.55. The Malaysian stock market fell, with the KLCI losing 12.40 points or 1.2% to finish at 1,031.63. Indonesia's Jakarta Composite index tumbled 84.81 points or 4.70% to finish the session at 1,719.25.

In the other part of the world, European shares were on track for their biggest one-day fall since March, after Lehman Brothers filed for bankruptcy protection in a move that eroded confidence in financials around the globe and prompted another concerted central bank intervention in the money markets.

Of national indexes, the German DAX 30 index fell 2.8% to 6,062.55, the French CAC-40 index dropped 3.3% to 4,191.04 and the U.K. FTSE 100 index fell 2.9% to 5,259.00. However the market fall accelerated further fuel by some of the negative economic events. At 11.38 GMT all this national indices continued with their negative positions as U.K. FTSE 100 index was up by 1.1% to 5,374.50. The German DAX 30 index gained by 0.5% to 6,208.63, while the French CAC-40 index was up by 1.1% to 4,295.91.

Wages in the euro zone grew at a much slower pace in the year to the end of June than they did in the 12 months to the end of March. According to data released by European Union statistics agency Euro stat, total labor costs in the euro zone during the three months from April to June were up 2.7% from the second quarter of 2007.

From Italy, the inflation rose to 4.2 % in August, outpacing prices in the euro zone, which have started to fall from a record high. According to the official statistics agency ISTAT the inflation was at it’s highest since January 1997 when the statistical series began, as food and transport prices continued to rise.

Looking ahead the day is scheduled to release data on new motor vehicle sales for Canada. From US we have New York empire state manufacturing index for the month of September, which will be followed by the data on the capacity utilization for the month of August. We will finish the daily calendar with the details on the industrial production of the US.