Monday Morning Musings

The markets have opened lower this morning, following material weakness in Asian markets overnight.

Asian markets were lower across the board, as the sharp rally in the Yen is hurting Japanese exporters. The sharp rally in the yen prompted the G-7 to issue a warning about the "excessive gains" in the currency.

S. Korea cuts its benchmark interest rate by 75 bps to 4.25%, its largest cut ever. But it did little to stem the selling in the short-term. ECB President Trichet said the ECB may cut rates again at its November 6th meeting.

The dollar is up again today, and commodity prices are lower. Oil is down below $63, and gold is down as well. The 10-year yield is lower at 3.68%. And the VIX is off -5% from its record highs Friday to 76.

The Fed is rolling out its new commercial paper facility today, and this should alleviate some of the pressures in the credit market. The Fed will buy commercial paper (short-term debt) from companies at rates well below LIBOR, which should help bring short-term rates down.

The bank index is higher this morning, led by regional banks. Energy stocks are the weakest group so far.

The FOMC meets this week, and there is much debate about whether they will cut 25 or 50 basis points. I don't have a good feel either way. They have so many other programs going on right now, they probably only need to do 25. But we shall see.