There has been no let up in risk aversion overnight, infact it’s been ratcheted up another notch or so. JPY and USD as usual are the main beneficiaries, EUR/USD down at 1.3005 from a North American close Monday around 1.3035, while EUR/JPY is down at 124.75 from around 126.10.
The swine flu virus continues to spread and fears grow that we could be headed for a pandemic. The World Health Organisation (WHO) has admitted the virus can longer be contained, and it’s Assistant Director General Keiji Fukada has said countries should now focus on mitigating the effects of the virus.
Another development has ratheted up risk aversion. The WSJ is reporting that regulators have told BofA and Citigroup that they may need to raise more capitial based on early results of the Governments stress tests.
Meanwhile negotiations surrounding the future of GM and Chrysler continue. As Chrysler plans stand the autoworkers union UAW would get 55% of the company, Fiat 35% and the US Government and secured lenders 10%.
In the GM proposal the Government would end up owning at least half the company, UAW would own about 39% and bondholders 10%. The group representing the bondholders has rejected the proposal and said it would make a counter offer.
