News & Current Affairs

October 2, 2008

US markets wary over rescue deal

US markets wary over rescue deal

Wall Street trader

The markets remain nervous

US shares have fallen sharply with investors cautious over whether the House of Representatives will back the revised bank rescue plan.

The House is due to discuss the scheme later, with a vote expected on Friday. The bill successfully passed through the US Senate on Wednesday.

On Wall Street, the Dow Jones index was down 263 points or 2.4% at 10,571, a slide dragging European shares lower.

The falls came as France said it would host a summit on the financial crisis.

The UK’s FTSE 100 closed was down 1.8% to 4,870.3 points while Germany’s Dax index shed 2.5% and France’s Cac 40 lost 2.3%.

Sentiment was further hit by glum economic data – showing that the number of people filing for new unemployment benefit claims rose to a seven-year high, while factory orders had seen a steeper-than-expected drop in August.

European talks

The office of French President Nicolas Sarkozy said the special meeting on Saturday would discuss a co-ordinated response to the financial turmoil amongst European members of the G8 ahead of a meeting of world finance leaders in Washington next week.

UK Prime Minister Gordon Brown is due to attend, together with German Chancellor Angela Merkel, Italian Prime Minister Silvio Berlusconi and European Central Bank President Jean-Claude Trichet.

Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy
Aric Au, Phillip Securities

But with just two days to go before the talks start, EU members are deeply divided, correspondent said.

France and Holland favor a European response to help banks hit by the credit crisis while Germany and Luxembourg believe a joint rescue plan is not necessary.

European leaders have denied speculation that they wanted to establish a unified 300bn euro ($418.4bn; £236bn) banking rescue deal along the same lines as the US plan.

The rescue idea was said to be being proposed by France, but Mr Sarkozy insisted that there were no such plans.

“I deny both the amount and the principle [of such a plan],” he said.

‘Essential’

In the US, a number of changes had to be made to the $700bn (£380bn) bail-out plan in order to help win approval in the Senate.

These include raising the government’s guarantee on savings from $100,000 to $250,000, tax breaks to help small businesses, expansion of child tax credit, and help for victims of recent hurricanes.

President George W Bush said that the package was “essential to the financial security of every American”.

However, economists said doubts remained about how effective the package would be.

“Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy,” said Aric Au of Phillip Securities in Hong Kong.

McCain and Obama

US presidential hopefuls John McCain and Barack Obama, who both returned from the campaign trail for last night’s Senate debate, voted in favor of the rescue plan.

Senate majority leader Harry Reid, a Democrat, said he was happy with the result and praised both presidential candidates for voting.

“I think it shows that when we work together we can accomplish good things,” he said.

Mitch McConnell, leader of Republican senators, was also in jubilant mood.

“This was a measure that was much needed, to unfreeze the credit markets and get America’s economy working again,” he said.

Advertisements

September 18, 2008

September 7, 2008

Global economy woes shake markets

Global economy woes shake markets

Japanese stock market trader

Japanese shares felt the force of the economic uncertainty

Fears about a global economic slowdown, heightened by worsening US job figures, have continued to undermine stock markets around the world.

London’s FTSE 100 index lost 2.3% – taking its weekly decline to 7% – its biggest since July 2002.

Markets in Paris and Frankfurt fell by 2.5% as economy concerns spread.

On Wall Street the Dow Jones index clawed back early losses to edge higher despite figures showing the US economy shed 84,000 jobs last month.

But the benchmark US index still had its worst week since May.

Earlier, Japan’s main share index fell nearly 3% while markets in Hong Kong, China, Australia and India all slid 2%.

‘Ugly’ data

The US labor market figures – which showed the unemployment rate rising to 6.1% – were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.

Economists had been expecting 75,000 jobs to be lost while the government also revised upwards.

“This was an ugly number that pretty much confirms that our economy continues to trend downward,” said Jack Ablin, chief investment officer of Harris Private Bank.

“This just knocks the legs out of any hope of seeing much economic improvement right now.”

‘Uncertainty’

Amid the uncertainty, few investors are willing to buy
Masayuki Otani, Securities Japan

The FTSE 100 closed down 2.3% at 5,240.70 points. The last time it lost so much value in a week was more than six years ago in the wake of financial scandals such as Enron and WorldCom.

Markets in Paris and Frankfurt continued their recent downward trend, both the Cac-40 index and the Dax-30 dropping about 2.5%.

The Dow Jones index, which lost 3% on Thursday, rose 32.73 points, or 0.3% to 11,220.96, but still ended down 2.8% on the week.

“Given the fact we were down so much yesterday we’re seeing a bit of a reflex rally with investors wanting to take advantages of some of the bargains,” said Bucky Hellwig, senior vice president at Morgan Asset Management.

The Nasdaq index slipped 3.16 points, or 0.1% to 2,255.88, ending the week 4.7% lower.

Earlier Japan’s benchmark Nikkei index fell 361.54 points to 12,196.12 amid a widespread sell-off of shares in Asia.

The Hang Seng index fell more than 3% in Hong Kong while markets also fell sharply in China, Australia and India.

“Amid the uncertainty, few investors are willing to buy,” said Masayuki, Otani, chief market analyst at Securities Japan.

“Several bad things happened at once,” he added, explaining the fall.

Gloom

Worries about inflation have prevented central banks in Europe from cutting interest rates to help forestall a slowdown.

But analysts believe this could change soon with economic forecasts across Europe looking increasingly gloomy.

The European Central Bank cut its 2009 growth forecast from 1.5% to 1.2% on Thursday while the UK economy stalled in the second quarter.

In a separate development, the Russian rouble fell against the dollar a day after Russia’s central bank intervened to support the currency amid concerns about a flight of foreign capital after the conflict with Georgia.

The central bank sold up to $4bn in reserves, the Financial Times reported, after the rouble slipped to its lowest level since February 2007.

Blog at WordPress.com.