The European Central Bank injected an enormous amount of liquidity into the market by auctioning 348 billion euros at a rate of 4.21% which figures to 25 basis points above the repo rate. The Bank of England conducted its own injection of a mere £10 billion at 45 basis points above the repo rate.

The Bank of Japan begins the final policy meeting of the year today. Clearly concerned about the effects of the US downturn on the Japanese economy, Governor Fukui is did indicate yesterday that central banks need to step up and intervene in the markets to bring calm and restore confidence. The market is looking forward to a possible rate hike in Japan by the end of 2008.

US Treasury Secretary Paulson reiterated that the turmoil in the housing market still weighs on the economy and growth will continue to be effected. Secretary Paulson speaks on trade issues at 17.30h today.