Financial Update

· TSX -229.38 pts (Reuters)commodities prices slumped as stock markets returned their gaze to the faltering global economy

· Dow -486.01pts
· Dollar -1.25c to $85.62US.
· Oil -$5.23to $65.30US per barrel the cost of a barrel has fallen 56% since July. Demand for gasoline in Oct. was 2.3% lower than a year earlier, the weekly Energy Information Administration report said.
· Gold -14.70to $741.30US per ounce gold and base metals prices fell on a firmer U.S. dollar.

Financial Post-City of Toronto existing home prices plunged 13% in October from a year ago and are now even lower than two years ago, the Toronto Real Estate Board said Wednesday.

Bank of England makes dramatic interest rate cut Reuters LONDON - The Bank of England slashed borrowing costs on Thursday by 150 basis points to soften the blow of a sharp economic downturn. The cut took interest rates to 3% from 4.5%.

Most economists polled by Reuters had forecast a half-point cut although several had changed their forecasts following a series of gloomy data. Ten out of 62 analysts predicted a full percentage point cut.

The central bank has never cut interest rates by more than half a point since it was made independent in 1997. The last time rates were slashed by a percentage point was in 1993, when the country was struggling to emerge from a recession.

Christian Vits, Bloomberg News The European Central Bank will cut interest rates for the second time in less than a month today as the region's economy suffers its worst slump in 15 years, economists said.

It's time for radical action,'' said Ken Wattret, an economist at BNP Paribas SA in London. ``This is a very severe economic downturn, interest rates should come down a long way.'' ECB policy makers meeting in Frankfurt will lower the benchmark lending rate to 3.25% from 3.75%, according to 54 of 55 economists in a Bloomberg survey.

Canada set to fight Europe over financial cure Paul Vieira and Eoin Callan I,Financial Post,
Canada is set to fight efforts by European leaders to champion an overhaul of the global financial system at this weekend's historic meeting of finance ministers and central bankers from the Group of 20 countries.

Jim Flaherty, the Minister of Finance, signalled the country's hard-line approach Wednesday in Peru while meeting his counterparts at the Asia-Pacific Economic Co-operation forum. He warned of European countries - led by France - that are trying too ambitiously to put a quick end to the current financial crisis, and find a cure to fight future credit crunches.

"Countries need to get their own systems in order to ensure that not only are their own institutions sound, but also that systemically they are sound," Mr. Flaherty said.

Prime Minister Stephen Harper will also take steps in the same tone when he meets Thursday in Toronto with bank and insurance executives.

The hastily convened talks on King Street will be used to help shape Ottawa's stance at upcoming international summits and press a domestic agenda to strengthen Canada's financial system.

The meeting will help inform the negotiating position of Mr. Flaherty as he heads from the APEC meeting to Sao Paulo, Brazil, for the G20 gathering, where he will be joined by Mark Carney, the Bank of Canada governor.

Mr. Flaherty and Mr. Carney are set to push a more pragmatic approach to preventing future financial crises, such as the one that has hit the global economy and forced governments to inject trillions of dollars into capital markets.

They will argue governments should focus on sound regulation of their domestic markets. Also, the two plan to highlight the Canadian system and its capital requirements of financial institutions, and how those rules have allowed the country to weather the credit malaise better than most.

While finance ministers and central bankers in Sao Paulo are to deal with more focused, technical matters, their discussions will set the groundwork for a meeting of world leaders, including Canada's Prime Minister, Stephen Harper, on Nov. 15 in Washington.

The gathering, however, appears to be shaping up as a divide between the efforts led by the French and British to overhaul the global financial system by introducing binding financial regulations all countries are to adhere to, and enforced by a reinvigorated International Monetary Fund.

But Canada, the United States, Australia and potentially other emerging economies will advocate a more "minimalist" approach to addressing future disruptions in the capital markets, said John Kirton, a foreign policy specialist at the University of Toronto and director of the school's G20 research group. This approach preaches a patient response to dealing with the crisis, and is skeptical of binding global regulations.

"Canada is sitting on the minimalist end of the spectrum and is probably even more minimalist than the United States for a number of basic reasons – one of them, the crisis has not come to Canada, yet," Mr. Kirton said.

Maurice Levi, a professor of finance at the University of British Columbia's Sauder School of Business, said he backs Mr. Flaherty's approach.

"This has become an international financial problem because risk has been spread all over the world – but it is not, intrinsically, a global problem," Mr. Levi said, noting the problem emanated from the packaging of subprime mortgages in the United States.

The Sao Paulo gathering is viewed as a historic encounter in the short history of the 20-nation group, because the top industrialized nations now seek the co-operation of the emerging giants to deal with the current credit crunch, and protect against similar market disruptions in the future.

The financial crisis "is a worldwide phenomenon ... and so we all need to be rowing the boat in the same direction," said Nancy Hughes Anthony, president of the Canadian Bankers Association, who will be closely watching what develops this weekend.

But she added the G20 members must have realistic ambitions. "It is nice to dream about creating new international bodies, but we have to improve our regulatory structure through our home regulators by more international co-operation. That's the way to go."

Ottawa's own domestic push to create a new national watchdog to supervise Canadian securities markets will also get strong support from Bay Street when Prime Minister Harper meets executives, who will bring to the talks a list of pressing short-term needs and longer-range ambitions.

People participating in the talks said the meeting would include banking executives from the Royal Bank of Canada, TD Bank, Bank of Nova Scotia, and Bank of Montreal, Canadian Imperial Bank of Commerce, and insurance executives from Manulife Financial and Sun Life.

The Conservatives are receptive to key demands from Bay Street to take fresh steps to level the playing field by easing funding and capital pressures on Canadian financial institutions, while weighing fiscal moves that would help Bay Street rebound.

But an aide to the prime minister indicated the government was unlikely to heed the request of manufacturers and issue temporary guarantees on loans and line of credits in an effort to get financing into companies' coffers.

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