By James Langton
(October 15 – 09:00 ET) – Crash Alert! U.S. Federal Reserve Board chairman Alan Greenspan returned to his “irrational exuberance” roots with some comments last night that sent world markets plunging and sets up North American markets for a similar slide.
Greenspan essentially said markets are bound to correct at some point, cautioning investors and banks to have excess reserves on hand when they do. This sent S&P futures plunging 20 points, along with triple digit losses in Asia and Europe. In the wake of these comments the dollar plunged against both the Yen and the euro. Since it’s Friday, no one is going to want to be long on the market heading into the weekend.
If Greenspan was trying to knock markets down he got a huge hand this morning from the U.S. producer price index. The PPI came in up 1.1% on the headline and 0.8% on the core rate – far ahead of expectations of about 0.5%. A huge down day appears to be in the offing.
Canada’s consumer price index rose 0.3% in September, showing strong growth but minimal inflation. Most analysts are expecting the Bank of Canada to hold the line on interest rates, regardless of what happens with the Fed. But, despite the data, Canadian investors may want to watch for the bears on Wall Street.
Even without the negative PPI report, the FTSE 100 is down more than 100 points in London. The German DAX is down more than 51 points and the French CAC 40 is off 25 points.
In Asia, Greenspan was the news. The Japanese Nikkei dropped almost 180 points in response and the Hang Seng slid 188 points.
In other business news, Air Canada says that it will get a helping hand from its Star Alliance partners, such as United Airlines and Lufthansa, in fending off Onex’s hostile takeover bid.
The dissident shareholders at Call-Net Enterprises have reached a deal to take control of that firm’s board. They are probably looking to sell all or at least part of the firm.
The TSE also said Corel Corp. will resume trading today, after it was halted for the announcement of charges of illegal insider trading against its chief executive yesterday afternoon.