Well another day another hole in the containment theory. Credit worries and a surge in the Japanese yen prompted a precipitous unraveling of the “yen carry trade” (a major source of global liquidity) which triggered the largest one-day sell-off of Japanese stocks on the Nikkei exchange in seven years. The Nikkei index dropped 5.3% on the day, from Market Watch:
Most Asian indexes dropped Friday as investors continued to downsize their portfolios in the wake of turmoil in the global credit markets and the Japanese yen’s rally against major global currencies. Shares of Japanese firms such as Sony Corp. and Canon Inc. were hit hard on fears their exports earnings will be pressured, while further selling in China-related stocks led to heavy losses in Hong Kong.
For those of you that need a refresher on our Fed Chief Ben Bernanke’s testimony to Congress back on May 18, 2007:
”We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system,” [Bernanke] said in remarks to a Chicago Fed conference.
Obviously.
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[Source: Blown Mortgage]
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