Snippets of the day - Wed 6 May 09

This morning in asian trade, news flashed across the Reuters screen saying that BoA might need USD 34 bn more in capital.

Coming as a surprise, the market promptly sold Dow futures, the Euro and cross yen pairs in a short flight to safety.

The worry of poorly capitalized US banks is the centrefold of the stress test result, which will be officially announced on Thur. If a majority of the 19 major US banks need to raise a lot more capital, then risk aversion will return for sure.

But, for political reasons, I doubt this will be the way the US government will put it across. They'd make it less of a problem than it really is.

After all, the government said no banks will need more public money after this test, and by the experience of the whole crisis, only seriously ill banks need public funds.

Fed Chairman Bernanke also said 'most banks are well capitalized'.

But still, this Thur's announcement should pose as a potential event risk. I won't be taking a position in stocks until I can see where sentiments are heading.

However, the sell off in the morning didn't last as euphoria once again overtook the asian stock markets. Judging from past weeks' statistics, foreign money had been pouring into asian stock markets and this doesn't look like stopping.

Maybe Asia is where growth will recover first.

Most bourses rallied higher impressively.