Subprime fear returns

All eyes (in Victoria) are on today’s Melbourne Cup. Financial markets turn their attention to the Reserve Bank’s interest rate decision. A Chinese company becomes the largest in the world, while another Chinese company has an Australian firm in its sites. Oh, and subprime fear is back. All this and more in today’s Money Morning…

All the details below…

Subprime fear returns
Extreme volatility will accompany investors into 2008 as global markets try to shake the US subprime mortgage blues, analysts say. But after the rollercoaster ride which had investors squeamish the analysts are tipping a return to a steady bull market in the “mid-term”. Local shares took another hammering yesterday after Citigroup in the US said it planned to take $US8-11 billion more in credit and other writedowns.

Braced for interest rate trifecta
Australian should prepare themselves for three more interest rate rises in coming months, which would take variable home lending rates over 9 per cent to a 13-year high. Economists said inflationary pressures, fuelled by a booming commodities sector and a raft of tax cuts, would almost certainly force the Reserve Bank of Australia to lift rates by 25 basis points to 6.75 per cent at today’s meeting.

PetroChina the world’s biggest company
PetroChina yesterday became the biggest company in the world by market capitalisation, speeding past ExxonMobil, and the first trillion-US-dollar business. Its crowning as No1 was due to an initial public offering of 4 billion shares on the Shanghai stock market, with the stock soaring to 2.6 times its initial price. The offer was 50 times oversubscribed.

Chinese chemical company set to buy Nufarm
Agricultural chemicals business Nufarm has given conditional support to a $3 billion takeover proposal from a private-equity backed consortium led by China’s largest state-owned chemical company. China National Chemical Corporation (ChemChina) teamed with private equity firms the Blackstone Group and Fox Paine Management III LLC to make the offer, and plans to transform Nufarm into a world leader in crop protection.

Australia’s Home-Loan Growth May Have Stalled on Rate Increase
Australia’s home-loan approvals probably barely increased in September as the highest interest rates in 11 years discouraged borrowing.

Chinese Stocks Trading in U.S. Tumble Most in Six Years
Chinese stocks trading in the U.S. tumbled the most in at least six years after Premier Wen Jiabao said his government may delay allowing mainland investors to buy Hong Kong stocks. China Mobile Ltd., the world’s No. 1 mobile phone company by users, had its biggest drop in eight months. PetroChina Co., the country’s largest oil producer, declined the most ever after Bear Stearns & Co. recommended investors sell the stock.

What the papers are saying:

Overnight Market News