...the main business headlines..........
Global stock markets take fright
Stock markets dived as investors’ concerns over the financial system continued to accelerate. The US Federal Reserve’s bail-out of insurer American International Group failed to have the desired effect and the Dow Jones index plummeted another 449 points to close at its lowest level for three years. Shares in London had slid earlier, in spite of the rescue of HBOS by Lloyds TSB, and in Russia trading was suspended amid the worst conditions since the Russian banking crisis of 1998. The rout continued in Asia, with markets across the region suffering severe falls.
Alexander Cockburn: McCain's advisor to blame for chaos 
Flight to safety as markets panic
As financial institutions across the globe suffered unprecedented problems, panic gripped the markets, said the Financial Times. Short-term US Treasury yields “hit their lowest level since the London Blitz” and gold had its biggest one-day gain in dollar terms. Lending between banks seized up as the financial system ground to a halt. Traders looked to park money in the safest place available, and three-month bills fell to 0.02 per cent, rates “that characacterized the lost decade in Japan”, helping speculation that the Federal reserve might cut rates soon.
Lloyds seals HBOS takeover
Lloyds TSB has agreed a £12 billion takeover of rival HBOS, with a government-sponsored deal to save Britain’s biggest mortgage lender from a “crisis of confidence”, said the Financial Times. The government waived competition rules to allow the creation of a ‘superbank’ and avoid any repeat of the Northern Rock debacle. Other banks were consulted on a possible deal, but Lloyds was said to the only one with the financial strength to take on HBOS without government guarantees. The purchase is an all-share deal, valuing HBOS at 232p per share.
HBOS: Lloyds rides to the rescue
People: Lloyds’s Eric Daniels, the quiet American
Morgan Stanley nears merger
Morgan Stanley is holding talks with American bank Wachovia about a possible merger, reported the Daily Telegraph. Shares in the broker had earlier fallen 4 per cent, as investors bet that all independent brokerages would be eventually forced to tie-up with commercial banks. Any deal would be likely to be a “merger of equals”, since the two institutions are roughly the same size. The chief executive of Wachovia, Bob Steel, is believed to be interested in such a merger, as it has been burned by its exposure to the US mortgage markets.
Washington Mutual up for sale
Washington Mutual, the biggest US savings & loan company, equivalent to a UK building society, is looking to tie-up with a partner bank, said Bloomberg.com. Interested parties for the Seattle-based lender are said to include JPMorgan Chase, Citigroup, Bank of America and Wells Fargo. Shares in the company have collapsed by 85 per cent this year in the wake of problems in the US mortgage markets. Regulators are encouraging problem banks to seek partners as a preferable alternative to government bailouts or bankruptcies.
EDF moves in on British Energy
EDF is preparing an improved deal for nuclear operator British Energy, reported the Financial Times. The board of British Energy met earlier this week to discuss the offer and was “expected to be able to recommend the EDF offer”. Seven weeks ago institutional investors including Invesco and M&G opposed the 765p per share cash deal then on the table, on the grounds that it undervalued the company. Now, Invesco, the group’s largest shareholder, appears to be ready to accept the new terms of the deal.
...in brief..................
BOE extends lending and Woolies counts costs
The Bank of England is to extend its emergency lending programme for financial institutions until next year, as banks find it increasingly difficult to fund their day-to-day requirements. The ‘Special Liquidity Scheme’ will now be in place until January 09…………
Japan’s central bank injected another 2.5 trillion yen in to the markets today in an effort to calm worried participants, said the Times. This takes the total to 8 trillion yen since Lehman Brothers filed for bankruptcy, but it did nothing to stem further sharp declines in Asian markets…………
Insurance companies are already counting the cost of their debt exposure to Lehman Brothers and AIG, reported the Daily Telegraph. Friends Provident said it has £18 million of debt at risk, while Swiss Re told the markets it has almost £125 million exposure to the pair…………
Meanwhile, AIG’s rivals are thought to be lining up to make offers for its subsidiaries, in the wake of its $85 billion bailout by the US government. Analysts expect Prudential and Munich Re, as well as Japanese and Australian insurers to register interest…………
Commercial property developer Minerva reported an annual pre-tax loss of £269 million, but after the company said takeover talks with Dubai group Limitless were continuing, shares in the company rose 18 per cent. Minerva is not paying a dividend…………
Woolworths new chief executive plans to close the company’s final-salary pension scheme, cut jobs and sell outlets, said the Times. The retailer announced a £100 million half-year loss yesterday – a record for the company, which is in need of a “radical reduction in costs”…………
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