By Edward Hugh: Barcelonabr /br /The Italian economy continued to contract sharply in the third quarter of 2008 as exports fell sharply - declining at the fastest rate in three years - under the impact of a global slump which weighed down on foreign demand for Italian products, and pushed the Italian economy into its worst recession since at least 1975. Sales of Italian goods abroad fell 1.6 percent from the previous quarter, their biggest decline since 2005.br /br /Pressure is of course on the government to offer a fiscal reponse to the problem, but given Italy's outstanding debt issues and the fact that a large part of the problem is long term structural and not cyclical it is hard to see much of note happening, and indeed Finance Minister Giulio Tremonti's statement this week that additional stimulus packages were pretty pointless could be read as more of an admission ...

Key News• Oil prices fell below $53 to almost a two-year low . (AP)• The yield on two-year US Treasury bonds hit a record low of 1.06 per cent, responding both to the fresh flight to safety and the prospect of lower interest rates. Eurozone government bond futures hit their highest level since March 2006. (FT)

• World stock markets tumbled Thursday, with benchmarks in Tokyo and Seoul losing almost 7 percent each. (AP)• Five years after Federal Reserve Chairman Ben S. Bernanke helped stamp out the risk of deflation, the threat is returning as the financial crisis and a worsening economic slump pull inflation lower. (Bloomberg)• The RBA said in a monthly bulletin today that it bought A$3.15 billion ($2 billion) of its own currency last month, the biggest net purchase on record, as the local dollar posted a record monthly decline. • U.S. options

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