...the main business headlines..........
US rescue plan collapses
The $700bn financial-rescue plan designed to bail out the US banking industry collapsed yesterday, brought down by “partisan wrangling”, said Bloomberg.com. After the House of Representatives voted against the proposal by 228 votes to 205, markets “plunged”, with the Dow Jones Industrial Average down 778 points or 6.98 per cent, its steepest drop ever, while the Standard & Poor’s 500 Index fell even more sharply to close down 8.4 per cent. Recriminations flew from both sides, as the issue took on a partisan angle, but the bill will be revisited later in the week.
Philip Delves Broughton: As markets fall, what happens now? 
AIG rescue raises questions about Goldman Sachs' influence
World stock markets head down
Fears over global contagion sent stock prices down in Asia, on the back of record overnight falls in US stockmarkets. Japan’s benchmark Nikkei 225 index fell 580 points initially to a three-year low of 11,164 before recovering a little to close down 484. Other markets in the region followed suit, with the Australian S&P ASX 200 index closing down 4.3 per cent. In early London trading the FTSE 100 initially fell, before moving into positive territory as US index futures prices rose strongly. Investors were hoping that an amended bail-out bill will be passed later in the week.
Wachovia rescued by Citigroup
The US’s largest bank, Citigroup, is to pay $2.16bn for Wachovia’s banking operations after shares in the bank collapsed. The North Carolina lender had not yet gone to the wall when the announcement was made, but has been struggling with its mortgage book, and in particular its option adjustable-rate mortgages. Investors will receive one dollar a share for their holdings and all depositors will be protected. Shares in Wachovia had fallen 82 per cent on the day at $1.84 and Citigroup shares ended the day down 12 per cent.
Oil prices drop as bail-out derailed
The price of oil fell sharply yesterday, along with other basic commodities, in the wake of the rejection of the US bail-out package by the House of Representatives, reported the Financial Times. In the US oil was down “by more than $10”, with analysts forecasting further drops across the board in commodities as the financial crisis spread to China. Gold however, bucked the trend, leaping 3.3 per cent to a high of $907, as central banks flooded the markets with liquidity. Analysts expect the trend to continue as long as the crisis persists.
Financial crisis hits Iceland
Stodir, an investment company controlled by Icelandic entrepreneur Jon Asgeir Johannesson, was forced into bankruptcy on Monday, reported the Financial Times. Stodir was the biggest investor in Glitnir Bank, which was nationalised yesterday by the Iceland government “massively diluting shareholders” and forcing Stodir to the wall. Johannesson also owns acquisitive retail group Baugur, owner of Karen Millen and Hamleys among others, in which Stodir was due to purchase a 39 per cent stake had it not gone into administration.
Irish banks suffer economic worries
Banks in Ireland suffered their biggest one-day fall in shareprices for two decades on Monday in the wake of the country’s economic problems, said the Financial Times. Property lender Anglo Irish Bank was the worst performer, plunging 45 per cent, while Irish Life & Permanent the bancassurer and mortgage provider, saw its shareprice fall 34 per cent. Ireland “once dubbed the Celtic Tiger economy” has since become the first country among those adopting the euro to officially declare it is in recession. Now investors are turning their guns on the country.
...in brief..................
Dexia rescued and buy-to-let woes
French-Belgian lender Dexia will get a 6.4m euros cash injection from governments and shareholders, said the Financial Times. The bank is the third major continental European institution to be rescued this week, coming on the heels of the Fortis rescue and Glitnir nationalisation…………
US regional banks were hit by heavy selling on Monday amid bailout-bill uncertainty. Shareholders in the institutions are seen as vulnerable either to collapse or dilution by government rescue. The KBW bank index fell 21 per cent, with Sovereign Bancorp shares down 68 per cent…………
Hedge funds are “braced for massive withdrawals” as the sector suffers meltdown, reported the Financial Times. Even hedge funds that have done relatively well in the crisis are facing redemptions from wealthy investors as the industry finds itself unable to find suitable investments…………
Pay-TV company British Sky Broadcasting has been ordered to sell its 17.9 per cent stake in ITV down to 7.5 per cent after losing its legal appeal yesterday. BSkyB bought the shares two years ago at 135 pence and has had to write down the shareholding by £616m…………
Tesco said today it had made “good progress” despite all the economic problems, reported the Times. The retailer has slashed prices in a big discount campaign, as a result of which it has been able to announce a four per cent rise in like for like sales over the summer…………
Fears are growing over the sustainability of the buy-to-let “phenomenon”, reported the Guardian. In 1998 there were 28,700 buy-to-let mortgages, today the total is more than 1.1m and in the wake of the B&B rescue the prospect of nationalised reposessions has grown............
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