U.S. Stocks closed at 5-½ year low

U.S. stocks closed at their lowest levels in 5-½ years on Monday, extending a global sell-off as worry about the severity of a global recession and the bleak outlook for profits gripped investors.
Trading was volatile and volume was light, with stocks falling sharply in the last half hour of trading. With just four days left in October, the S&P 500 is on track for its worst month ever in the post-World War Two period.

Hedge funds and mutual funds have been dumping stocks to raise cash to meet redemptions from their clients, traders noted, exacerbating the late-day selling.


JPY gained and GBP declined
The yen rose to the strongest level versus the euro since May 2002 and traded near a 13-year high against the dollar as global economic turmoil encouraged investors to sell higher-yielding assets funded in Japan.


French Finance Minister Christine Lagarde said in an interview with Bloomberg News that the Group of Seven doesn't plan to intervene to weaken the yen after the G-7 said in an unscheduled statement that excessive movements in the currency may threaten financial stability. The pound slid after an industry report showed U.K. house prices slumped.


Japan: Yen rise not due to fundamentals

The recent surge in the yen does not reflect Japan's economic fundamentals, Economics Minister Kaoru Yosano said, adding that an interest rate cut by the Bank of Japan would affect neither the currency nor the economy.


Reflecting growing concern over the recent volatility in market moves, Finance Minister Shoichi Nakagawa said the government would ban from Tuesday naked stock short-selling, in which traders effectively sell stocks without first borrowing them to sell.

But Nakagawa would not comment on whether Japan will intervene in the currency market to tame further yen gains. The yen has leapt about 20 % on a trade-weighted basis this month as investors unwound carry trades.

On Tuesday yen slipped against major currencies as some market players booked profits on the recent surge.

Government efforts to stabilise financial markets have provided little respite, with the Nikkei stock average sliding below 7,000 to hit a 26-year intraday low on Tuesday. At 3:40 GMT Nikkei had recovered and was trading in positive territory at 7,297.



Australia central bank intervenes again

Australia's central bank intervened to prop up the Aussie dollar for a third straight day on Tuesday after the currency fell to fresh 5- year lows against the U.S. currency in offshore trade.
A spokesman for the Reserve Bank of Australia (RBA) said the central bank was providing liquidity in an illiquid market, echoing comments made a day earlier.

Dealers also said the central bank was buying the Australian dollar at around the AUD 0.6060 level during the European session on Monday, but the RBA declined to confirm that.

"They are trying to make the decline less disorderly," said John Horner, foreign exchange strategist at Deutsche Bank. "Despite their intervention, the process of deleveraging and pricing of a global slowdown will continue to weigh down on the Aussie."