...the main business headlines..........
UK market up on US support plans
UK stocks were up over six per cent in early trade on government support plans and measures to restrict short selling on both sides of the Atlantic. US stocks staged their biggest rally for six years yesterday, moving up 600 points from their intra-day low. Behind the turnaround was a plan proposed by Senator Charles Schumer for a new agency to provide financial companies with capital. Financial shares had seen a renewed sell-off, before the announcement spurred a late rally in the final hour of trading. Also key was the decision by US pension funds to stop lending shares for shorting.
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Asian shares join market euphoria
Asia’s markets rallied in the wake of Wall Street’s late turnaround, with Chinese shares leading the charge, said the Financial Times. The Chinese authorities followed the lead of the US, announcing measures to support its stock market, which is down 70 per cent in the last year. China will scrap stamp duty and buy shares using government funds, plans which were “applauded” by investors, who pushed the market up 9.5 per cent, with many individual shares reaching their 10 per cent daily limit. In Hong Kong shares rose 6.3 per cent and Japan’s Nikkei index was up 3.6 per cent.
FSA bans short selling
The Financial Services Authority has placed a ban on the short selling of shares in banks, insurers and other financial companies. A list of the companies involved includes names like HBOS, Lloyds TSB, RBS, RSA and Legal & General. After the announcement shares in UK financials which trade in New York jumped by 10 per cent, with Barclays soaring more than 20 per cent. Hedge funds, which habitually short shares, have been blamed for recent market weakness, but representatives of the industry suggested it was the wrong target.
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Morgan Stanley in sell off talks
Morgan Stanley is in talks to sell a stake in itself of up to 49 per cent to China Investment Corp, said the Financial Times. Recent movements in the broker’s shareprice meant that the company was forced to seek the security of tie-up with China’s state investment fund. A merger with troubled US lender Wachovia Bank had been mooted, but Morgan Stanley management “preferred a stake sale”, according to sources inside the company. Shares in the broker had fallen over 70 per cent over the past year, while before Thursday’s late rally its stock was down 30 per cent on the day.
Putnam latest to close fund
Putnam Investments closed its $12 billion prime money market fund as clients swamped it with redemption requests, reported the Financial Times. The company stressed it did not have any exposure to Lehman Brothers or any other afflicted financial companies, but the closure was a “reaction to market-wide liquidity issues”. The fund has maintained the $1 per share level, in contrast to the Reserve Fund, the oldest Market fund, which earlier in the week reported that it had “broken the buck” as a result of its exposure to Lehman Brothers.
HSBC scraps KEB purchase
HSBC, Britain’s biggest bank, gave up on its acquisition of Korea Exchange Bank from Lone Star Funds, in the wake of the turmoil created by the global credit crisis, reported Bloomberg.com. It is the second such failure to complete a purchase in the last three years, although there is speculation that it may instead have found an alternative target after the volatility of the last few days. The purchase of KEB, first mooted last September would have given HSBC 345 branches in South Korea and enabled them to gain ground on rivals like Standard Chartered and Citigroup.
...in brief..................
Mortgage lending drops and Informa deal falls through
New mortgage lending dropped to a three-year low in August, amid falling house prices and an uncertain outlook. According to the Council of Mortgage Lenders, the amount of money advanced declined 12 per cent month on month and 36 per cent on the year…………
The Office for National Statistics announced that public sector net borrowing reached £10.4 billion in June, putting the deficit on course for at least £60bn this year and raising concerns of a £20bn “black hole” in the country’s finances versus the estimated annual debt…………
Warren Buffet has entered the financial fray created by recent market turbulence, agreeing to pay $26.50 per share for $4.7bn US power company Constellation Energy Group. It is picking it up at half the price it was a week ago and trumping the offer from France’s EDF…………
BTG has agreed to acquire Protherics for £218 million in a deal which will create one of the UK’s biggest biotech companies. The deal will create a new company worth £400 million and should result in it joining the FTSE 250 index. £20 million in annual cost savings is envisaged…………
Shares in Volkswagen jumped by 20 per cent yesterday on expectations that Porsche would raise its stake in the German carmaker. The shares are up 33 per cent since Tuesday when Porsche announced that its stake in VW had risen to more than 35 per cent…………
The private equity consortium headed by Providence Equity Partners walked away from a deal with Informa, publisher of Lloyd’s List, after it was unable to find the funds for an improved offer. Financial turmoil meant that it could not improve its rejected 450p offer…………
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