"Thank you and also to the subscriber for bringing up the Bloomberg US Financial Conditions Index to our attention. That is most useful. Also shows the wide radar of the Collective.

"Main media has been reporting this time about the problems of Eurozone. I find these in your library useful tools, EUR LIBOR 3mth - Euro Generic 3 mth yields Markit iBoxx EUR Liquid High Yield Index (CDS) Perhaps with contributions from other users, you might be able to come out with a combination or overlay of sorts that you can call unique.

"For Asia where I come from, I had long ago requested JACICOBS which I continually to follow daily. The problems of Chinese property and financial firms and Asian HY have only been recently cropping up and much of the problems might have started this year with Eurozone but every country depending on China has its own set of concerns now as well. Recently contributors have requested and you have added JPEIJACC and XJIG, both of which I find useful as well.

"Thank you and the Collective."

Eoin Treacy's view Thank you for this summary and for reminding me of these useful credit indices which I'm sure will be appreciated by the Collective. I have pointed out the EUR LIBOR 3mth - Euro Generic 3mth as the Eurozone's equivalent of the USA's TED spread on a number of occasions. Since the focus of investor anxiety remains the Eurozone, this should be a reasonable barometer of the region's financial sector risk premia. It continues to edge higher which represents a deteriorating perception of confidence in the financial sector. While there has been a great deal of talk nothing has yet happened to check the widening of this spread.

The Markit iBoxx EUR Liquid High Yield (Price) Index hit a medium-term peak near 130 in May, broke below the 200-day MA in July and continues to extend its decline. A sustained move above 125 would be required to begin to question potential for additional downside. The JP Morgan Asia Credit Index Core (price) has a similar pattern

The JP Morgan Asia Credit Composite Blended Spread Index broke out of an almost two-year base in August and continues to extend its advance. A break in the progression of higher reaction lows would be required to suggest a declining risk premium. The Markit iTraxx Asia Ex-Japan Investment Grade Index has a similar pattern but pulled back sharply today suggesting an improving outlook..

Widening spreads across regions and asset classes regardless of credit quality are suggestive of deleveraging. The strength of the US Dollar is a mirror image to the above widening of credit spreads. The US Dollar spent much of the last couple of years in a downtrend. Ultra low interest rates made it the funding currency of choice for leveraged traders. It has broken its downtrend against most currencies and is putting pressure on highly leveraged traders to either fund or close their positions. This is most evident in the credit markets but stock markets have also been susceptible to the unwinding of leveraged trades.

What next?

The US Dollar has become overbought in the short-term and appears to be at least consolidating. US Treasuries, Gilts and Bunds have all at least lost momentum and are potentially topping. Stock markets are mostly bouncing from short-term oversold conditions. Bank sectors such as the S&P500 Banks and the Euro Stoxx Banks have stabilized. Commodities such as platinum, copper and corn are also bouncing from oversold conditions. This process of short covering can probably go on for a while longer.

Over the medium-term, Treasury bond prices will have to form a convincing top. Stock and commodity markets will have to sustain moves above their respective 200-day MAs and credit spreads will have to stabilise in order to suggest a return to a more risk tolerant environment.