...the main business headlines..........
Market rout on Lehman bankruptcy
The global banking crisis was "threatening to spiral out of control" yesterday, as the US authorities desperately tried to save its biggest insurer and prop up the financial industry, said the Independent. Emergency talks on AIG went on all day, without resolution, as Lehman employees around the globe packed up their belongings and went home. The Dow Jones Industrial index fell 4.5 per cent, its worst performance since 9/11, after the FTSE-100 fell four per cent. Overnight in Asia the rout continued, with Japan's Nikkei index collapsing nearly five per cent.
Lehman exposes Wall Street’s moral bankruptcy 
AIG credit ratings cut
AIG, America's biggest insurer, had its ratings cut on Monday "potentially triggering billions of dollars of collateral payments" on derivatives trades, reported the Financial Times. Ratings agency Standard & Poor's downgraded AIG's long-term rating to A minus from AA minus on the back of expected losses on derivatives and mortgages. The agency warned that its ratings could be cut to as low as BBB unless it raises cash by selling assets. Shares in the insurer fell sharply, ending the day down more than 60 per cent.
Lehman exposes Wall Street’s moral bankruptcy
China cuts rates
China's central bank cut the country's interest rates for the first time in six years yesterday, to try to ward off the effects of a global slowdown. The People's Bank of China reduced the rate on its benchmark rate from 7.47 per cent to 7.2 per cent after a number of years of rises. Lower inflation has given it the freedom to act, and at the same time it lowered the reserve rate requirement for the country's smaller banks, the first such drop since 1999. The Chinese stock market has fallen by more than 60 per cent this year so far.
An economic slump could kickstart the old superpowers
Credit default swaps under pressure
The failure of Lehman Brothers is putting "significant strain" on the market for credit default swaps, said the Independent. The instruments provide insurance against the risk of corporate default and are issued by insurers like AIG, with brokers such as Lehman acting as counterparties. Yesterday the cost of a CDS surged as worries increased over the financial industry and the possible "unravelling" of the $62 trillion market. The unwinding of Lehman's positions "could affect the values of many kinds of derivatives" around the globe.
Crude oil plummets
The price of crude oil fell to a seven month low as traders switched into cash and gold, reported the Daily Telegraph. Oil on the New York Mercantile Exchange fell below $100 per barrel to $97 yesterday in the face of the world’s worsening economy, with Virgin Atlantic boss Richard Branson predicting it would collapse further, to as low as $56 per barrel. The collapse spread to a broad range of commodities, with only gold and silver bucking the trend as safe haven investments.
Turmoil brings UK rate cut closer
Investors are now expecting interest rates to be cut in the UK as early as next month, in response to the problems facing the financial industry, reported the Daily Telegraph. In the wake of the Lehman collapse the market now sees a quarter-point cut in October, with another three reductions coming by February. Previously many analysts had expected the BOE to hold rates steady until the start of next year, but increasing forecasts of recession and the turmoil in the global banking system are increasing the need for rate cuts.
...in brief..................
HBOS shares slump and Best Buy acquires Napster
Banking group HBOS was worst hit by the flight out of banking shares in London yesterday. More than a third of the value was wiped off its shares at one point, bringing insistence from the group that the selling was unfounded. It closed down 17 per cent…………
British Energy and EDF are nearing a deal, with a meeting scheduled later this week to discuss the improved offer by EDF for the UK nuclear company. The offer now stands at over £12 billion, which includes a higher cash offer of about 775p per share…………
Tragus, the company behind the Strada and Café Rouge restaurant chains, announced yesterday that its sales growth had halved during the course of the last year. The rising cost of food also put pressure on profitability. Tragus is backed by private equity group Blackstone…………
Hewlett-Packard plans to axe 7.5 per cent of its work force, a total of 24,600 jobs, as it faces up to its recent acquisition of Electronic Data Systems, said the Times. The printer company said that it will make the cuts over the next three years, nearly half of which will be in the US…………
Another travel company has gone bust, stranding more holidaymakers abroad. North London operator K&S Holidays went under leaving tourists in Turkey to return home by other means. Controversy surrounds the demise of XL, with Alitalia still teetering on the brink…………
Best Buy, the biggest US consumer retailer, is set to buy Napster, the online music company, for $121m as it tries to establish itself as a “significant force” in the digital, portable music market, said the Financial Times. Earlier this year Best Buy tied up with Carphone Warehouse…………
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